$1000 Emergency Fund Saved, Now What?

[savegreen]

I've never had an emergency fund before, but after saving since the beginning of the year and overcoming some unexpected setbacks, I now have $1000 in an online bank account as my emergency fund. I feel great having it as I've never had one before, and I can feel a lot less money stress, but now what do I do?

[Jluke]

Good job on reaching your target EF

No need to stop building the EF yet. However:

Are you contributing to a 401k to get an employer match?

Do you have a Roth IRA?

What is your current debt situation - loans, credit cards. Include balance and interest rates for each.

[savegreen]

I hate to admit it, but I have a lot of credit card debt. About $15,000. And student loans. I was just so excited to finally reach the $1000 emergency fund goal which was something I wasn't sure was even possible, I kinda just started wondering, what next? I guess I should start paying down the credit card debt before I build up the emergency fund more?

[disneysteve]

I guess I should start paying down the credit card debt before I build up the emergency fund more?

Can you list your debts including outstanding balance and interest rates?

The simple answer is yes, you should maintain your EF - congrats for doing that by the way - and now focus on attacking the credit cards. You may want to split the money a bit to keep feeding the EF, even if it's only $5 or $10 from each paycheck, just to stay in the habit of putting that money aside.

[Eagle]

I've never had an emergency fund before, but after saving since the beginning of the year and overcoming some unexpected setbacks, I now have $1000 in an online bank account as my emergency fund. I feel great having it as I've never had one before, and I can feel a lot less money stress, but now what do I do?

Congrats! Now it's time to start tackling your debt. A lot of people do that by using the debt snowball in paying off your accounts with the lowest balance first.

1. Create a list of all of your debts: credit cards, car loans, student loans, mortgages, etc… (Note: You probably need to exclude your mortgage if you have one from the list until you have the other debts paid off)

2. Next to each one write down the total balance owed.

3. Re-order these from smallest to largest debts (use Excel to make this simpler.)

4. Pay the minimum payment on all of the debts – except the smallest one.

5. Put every extra dollar you can find towards paying off that smallest debt.

6. Celebrate like crazy when you get that first debt paid off.

7. Take the amount you were paying towards the first debt and put towards the next smallest debt. Do this until this next one is paid off.

8. Celebrate again!

9. Continue this process until each one is paid off.



Then, after you do this increase your emergency fund to about 6 months of expenses, start investing for retirement, pay off your mortgage, etc.

[snafu]

@savegreen, good on you for taking the 1st step by creating an EF and getting $ 1,000. stashed in spite of unexpected set backs. I'm confident you can take the next step and list CC balances and interest rates. Perhaps we can make suggestions to reduce costs and help get you in a better financial picture. We're certainly here to cheer your every success!