How do you build an emergency fund when you can't even pay off your bills?

[liveandchi]

The start of Jan. looked like we might be making progress and then the car died. $300 to fix it that wnt on the credit card. That means all the effort we've made has been erased it a single moment. How am I supposed to build an emergency fund when we can't even manage paying of the bills each month. I'm wondering if bankruptcy should be an option?

[txjman]

I have had the same thought go through my head. I am due a fairly large tax return which I hope will act as my emergency fund for the rest of the year, but will see how that goes. I am also thinking that since my tax refund is potentially so large, I should have less taken out of my paycheck. Hopefully that will help too.
I certainly don't want to file backruptcy, but I wonder when I have reached the last resort.

[JLP]

That's a tough one and probably the reason why so many people don't even try to save. Have you sat down and done a budget? Are you spending less than you make? Do you know what is going where? Car repair expenses should be a budgeted item.

Keep plugging away and eventually you will see daylight. I promise.

JLP

[terry1156]

From the information you gave in the other thread, I think you can come out of it without bankruptcy. You had a tough month and there will be more in the future, but keep working on reducing the expenses and saving and you can succeed in getting rid of the debt.

[asrai]

Get some other source of income to cover your deficit. IT only has to be temporary until you can get ahead some.

[Momtwo]

Give us an idea of what income and expenses you have and maybe we could give you some advice. Without it we would just be guessing.

[Tree0164]

If you are not meeting your monthly expenses and you have cut down to the bare bones, you need to get more income. Grab a second job, look at work at home options etc.

Then focus on getting current on your bills if you are behind.
Set up a baby emergency fund of about $1000 so that a $300 car expense wouldn't kill you.

I know it is hard to be so focused on the money and cutting out the expenses but the financial peace is going to be so worth it.

[tag61usa]

The road seems to be filled with speedbreakers, doesn't it?

We don't have an emergency fund, but do have a back-up fund. It's in the form of a home equity line of credit (heloc). I would really prefer to have an emergency fund.

[the4parkers]

you sound like me a year ago. you just have to start .. just do it. for us.. we opened up an ing acct. get 15 dollars taken out of hubby's acct a week. sounds like not a whole lot, but when you need it to pay a bill it is a huge amount. we took the dive and soon found out that if you don't have it you won't spend it! ing acct is online so we have no mac card, no check book and it isn't available to us right away... perfect for dh and I. when the car died. we were able to borrow from it and actually break the credit card cycle FOR ONCE WE DIDN'T HAVE TO USE THE CREDIT CARD!!!!! we now have almost a thousand in there. perfect cushion for us. we are still struggling to pay the bills don't get me wrong, but it isn't nearly as stressful because we know we have that cushion, and since we see the statement and know we have it we do everything we can to watch it go up, and not borrow from it to pay the bills. you just have to take the plunge. have to start somewhere and the sooner the better. if you can't meet monthly bills then yes obviously extra income would be the answer. need to think though if you had the extra income would you throw it all towards bills?? usually the more you make the more you spend. bankruptcy is always an option for everyone, but i really think if you try the snowball effect there shouldn't be any reason why you can' tget out of this.. we were once over 50 grande in debt.. (i was 24) and we nailed it. wasn't easy. i had my poor me moments, and the man i wanna go to the mall moments, and i hate the fact that my kids always have hand me downs moments lol, but ya know.. seeing my bank acct arise from the negative was a big realty check for me.. you need to figure what works for you and what keeps you motivated to keep saving and scrimping. you need to see your money working for you rather than the bills. you can do this you just need to suck it up.
i don't agree with budgeting. it never did a darn thing for me.. no reprecussions if I didn't stick to it.. so why bother. what did work for me was writing myself a goal (financial goal) and stick it in my wallet, in my check book, taped one to the back of my atm card. whereever money was i wanted to remind myself over and over my goal. if my goal was to pay a huge gap card bill, so i could reward myself with a night at a hotel. i would write that down. everytime i was going to use my money i would see it and ask myself if i needed to spend this money that bad.. 9 out of 10 times i would put the money back in my purse..you just need to see what works for you

[akaivyleaf]

I agree that you just have to start doing it. As bad as it sounds, you have to pay yourself first, before you pay anything else. Pay yourself even 10 dollars a pay check. Its not so much about the money as it is about forming and cultivating the habit. Soon you'll find the habit addictive and will find more ways to save which will include cutting down on creating bills.

Yes, save SOMETHING in spite of the bills. They've been late or they have been not being paid in full, so use that money on you, for your future. You will always have bills and you will progessively find ways to cut the amount of the bill, or you will have a more organized plan of paying them.

Please note, I'm not advocating forgoing a bill payment, only paying yourself, just like you have dedication to those bills.

[jhd815]

the only advice I have to offer is to save something ... it's better than saving nothing.

[liveandchi]

So are you recommending that I save $10 from my paycheck even if that means defaulting on a credit card payment?

[the4parkers]

defaulting on a cc payment will in the long run cost you more. i think we are suggesting you focus on at least 1 cc and get it paid off. pay over the minimum even if it is just by a buck. if building an emergency fund is important to you.. take the minimum you were paying on that credit card into a seperate acct. perhaps ing since you can do an automatic transfer. if you don't see it you won't miss it.. have you thought of anything you could do for some extra cash to get your bills paid down

[akaivyleaf]

As controversial as this may sound, I"m not advocating that you pay late or not fully on something that will cost you more money in the long run, thats counter intuitive. I am suggesting that some bills don't incurr an expense to run a balance. Like the power bill or the water bill, whereby you might be able to squeeze out something to save.

But getting another income would solve this problem if you dedicate a percentage of that additional income to savings.

[liveandchi]

Can someone explain to me how the snowball method works?

[JLP]

Originally Posted by liveandchi

Can someone explain to me how the snowball method works?

First, you gather up all your credit card and other debt bills. Then you organize them according to size, smallest to biggest. Figure out your minimum payments on each of the debts. Any money extra you throw at the smallest debt first, knocking it out as quickly as you can. Then, once it is paid off, you apply that amount to the next debt and so on and so forth until all the debts are paid off.

Make sense?

JLP

[Russell]

Originally Posted by jhd815

the only advice I have to offer is to save something ... it's better than saving nothing.

That's absolutely true.

If you save $1 a day that adds up to $365 a year which could easily pay for a unexpected $300 car repair bill. Can you save $1 a day ? maybe $2 a day ? add a little bit of compounding interest + $25 from INGdirect.com and you just built yourself a small emergency fund.

If you can't save $1 a day, post your expenses here and let's see where you can possibly cut back.

One thing though, savings needs lots of patience...it takes a while to build them up but don't let that discourage you. Just stay focused by setting a goal for 1 yr and then dividing that by 12 to see how much you need to save each month to realize that goal. Then divide that up to see your weekley and daily savings goal.

[PRICEPLUS]

There are always ways to squeeze a little more money out of the budget. When I was first married the wife and I ate a lot of beans and rice. Lentils are also good. Squeeze five bucks a week out of the food budget and you have saved 260 dollars over the course of the year.

A dollar here and a dollar there don't seem like much but over the course of a year it adds up. Russell was spot on in his message.

Getting out from under is a bear and I know about it first hand. You must persevere in order to obtain your goals. This site is full of good stuff you can use in order to get there.

[Armywife]

Originally Posted by Russell

That's absolutely true.

If you save $1 a day that adds up to $365 a year which could easily pay for a unexpected $300 car repair bill. Can you save $1 a day ? maybe $2 a day ? add a little bit of compounding interest + $25 from INGdirect.com and you just built yourself a small emergency fund.

Russell has a good point. We all splurge silently at some point during the day. Whether it's that extra large cup o joe that you only drink half of... that extra donut or bagel you think you'll eat but wind up leaving more than half behind... perhaps it's the extra impulse items you buy at the supermarket which wind up expiring on your shelf (I still have Hamburger Helper boxes from my single days LOL).

There's also habit cutting. Even if you cut back on habits (instead of smoking a pack of cigarettes a day, trim it to three packs a week etc) you can manage a few bucks here and there. Where there's a will there's a way... bankruptcy may seem a good thing but it takes YEARS to get your credit back to normal (trust me).