How to stay on track when life threatens to derail your financial plans
by Christie Browning
In previous posts I’ve shared the trek Mat and I are making to become debt free. We’ve discussed our communication styles and our biggest ace in the hole that gave us momentum in paying off debt. However, even the best laid plans can come undone when life throws wicked curve balls. In January, we were in a car accident that totaled our vehicle. The loan, thankfully, was paid off through our car insurance, but a lot of ancillary costs came up that we hadn’t planned for.
In addition to having the unexpected costs as a result of the accident, a few weeks later our dryer went out that also required a rewire of the outlet. It’s true that our emergency funds are meant to cover these unexpected expenses, but what do you if life keeps heaping on the charges after your emergency fund is depleted?
How to stay on track when life threatens to derail your plans
Use the resources you’ve been saving - Once you’ve got your emergency savings in place, you don’t want to touch it. In fact, you may find that when emergencies come up, you’d rather NOT use your emergency fund. My husband said he liked seeing the emergency fund sitting perfectly at $1,000 and he hated to touch it. But when an emergency comes, that’s what it’s there for. Don’t ditch the plan and use credit to cover a cost if you’ve got your emergency fund.
Evaluate your regular budget - If you’ve been paying off debt and using a debt snowball, chances are you have some extra money in your budget you’ve been putting towards debt. If your emergency exhausts the savings you have, look to your budget for places you can pull out some cash to cover the costs. If you have an extra $500 a month going toward debt, your emergency may require you to use that $500 instead of putting it on debt that month. While you might feel that this stalls your debt snowball or delays getting out of debt, it’s still better than reaching for the credit card.
Stick to the plan - When life wants to upset all your plans, hang on a little tighter. Yes, you may have to divert your efforts to tackle an emergency but don’t throw out the baby with the bathwater! Keep focused on the bigger picture and know that progress doesn’t have to be perfect to keep moving you forward. Keep in mind that these disciplines are preparing you for when you are debt free. Emergencies will always pop up, but if you’ve been diligent to tackle them with some financial smarts, you’ll be better equipped to make the smarter decision once you’re debt free.
Replenish the emergency fund asap - If you do tap into your savings fund for an emergency, you’ll want to bring that balance back up to $1,000 as soon as you can. Unfortunately, life’s hiccups come up more than once so you’ll want to be prepared. Yes, that may mean stalling your debt payoff for a bit until you get the balance back to $1,000, but when the next emergency hits, you’ll be thankful you have your $1,000 in place.