When is enough, enough?
First it was save $1,000, then $2,000, then $3,000…now? When it comes to Dave Ramsey’s plan to get out of debt, my husband and I are avid fans. We do not, however, agree with his recommended $1,000 baby emergency fund which is baby step one. My guess is that he set it at that amount since it is achievable. To tell someone to save $3,000 fast would no doubt leave them feeling that the plan is impossible and just not for them. But when is enough, enough? That is the struggle we are currently facing.
Baby Step One: Save $1,000 fast. We were fortunate that we were able to do that simply by rearranging some of our funds and labeling it as our emergency fund. Baby Step Two: Start paying off all your debts smallest to largest. That one isn’t quite so easy or fast. For one thing, we have a lot of debt and no amount of rearranging is going to eliminate it any time soon. Second of all, we keep going back to Baby Step One! No, thankfully our $1,000 hasn’t gone anywhere…we just keep wanting to see it grow! While that’s all good, it is hindering our progress of Baby Step Two.
So when is enough, enough? I think that is a difficult question to fully answer as everyone has a different set of circumstances. What might be enough for one person, may very well not be near enough for someone else. A security gland gone berserk only yet further adds to the level of indecision. My husband and I have gone back and forth on “how much” so many times, that I am starting to feel as though I have a serious case of financial whiplash. Honestly at this point I don’t really think you can ever have enough. At some point though, you just need to agree that enough is enough and decide to quit straddling those baby steps…and that is precisely what we have decided to do! As I mentioned yesterday, we are getting a tax refund. We have decided to add that to our emergency fund and add just a little more to bring it up to $4,000. Once that is done, we will jump with both feet to Baby Step Two. Goal is to have that completed by the end of this month.
Have you experienced the slippery slope of Baby Step One? How did YOU decide when enough was enough?
Great question. We’ve always followed a more “modified” version of the baby steps. Always kept at least $2500 in our emergency fund, and didn’t stop contributing to savings while paying off debt. We had a pretty tough year that taught us the importance of a big savings account, now I don’t feel comfortable with anything less than 12 months expenses in the bank. It terrifies me actually. That’s more for step 3 though. Step 1, $2500 was our “comfortable” number before DH was in a car accident. After that life-changing incident, I knew we needed to increase it asap. Which is why we have a large savings account and still some credit card debt.
Can’t wait until we have 12 months of living expenses saved. Congrats on reaching that point! Based on your ability to save, I’m sure you will get that credit card debt paid off in no time.
I like to have $5,000 in my emergency fund. No reason. It just makes me feel better. $1,000 is way too low for my security gland!
That is the exact number I would have preferred! A compromise, plus the need to get moving with paying off our debt is how we settled on $4,000. Thanks for commenting!
I believe D Ramsey’s baby step #1 is so you have an emergency fund before you start throwing $ at debt.
A “we had a car repair or something broke in the house and needs fixing asap” emergency fund, not a “I lost my job” emergency fund.
Saving up $1K is more a psychological boost than anything else, especially to someone who has never been able to save anything or has never tried to.. It puts you in the right frame of mind to dig out of debt in step #2.
If you can cash flow any irregular bills that come along while you are throwing $ at debt and you aren’t on the brink of unemployment and/or having to replace a vehicle(or other major forseeable large expense)then $1 or $2K emergency fund in the short term should be enough. Jacking it up too large just delays dealing with the debt.
If you aren’t happy with that small of a emergency fund then why not split your savings after you have $1 or $2K saved there so that half goes to debt and half goes toward step #3(the 3-6 months of living expenses saved–which IMHO should be 9 months of living expenses saved). Your debt progress will be slower but you will be working on two goals at the same time and in the end, you need to accomplish both.
Very good point about it being a psychological boost! Amazing what you can do when you make up your mind to do it! I also agree that 3-6 months isn’t enough…when we reach that point, I’m sure we will go for 9-12 months. Thanks for your comment!
My goal is $5000. I was almost there but didn’t happen. I at least feel “comfortable” with a min of $3k. I”m sure it is a different number for everyone. There was a day when I was happy to get $500 in there LOL
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Oh how our perception changes as we work the plan! I like to say that we’ve saved in the past, but the savings never seemed to stay put. This time, however, they are!
I would like 5000 but right now I am lucky that I have 500 but I will get there…they are called baby steps, right?
You are so right, Patti! Keep the focus! You can do this too!
I love this post. I go back and forth all of the time. Right now I have 10k in an emergency fund, but I have a compulsion all of the time to dump it into debt, but then I don’t. I am not sure why or at least do part of it. I mean my job is really stable, if I reduced my retirement contributions back to the minimum I could basically pay all of our bills with my salary and extra classes I teach, but for some reason I feel like I need to have that 10k in place.
What I would love to do is to have that be 100k and write a check and pay off the house, even though I know mathematically it is not the right thing to do, but I guess we will see.
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Thank you and sorry for the delayed reply! I need to be better about checking my spam for legit comments! Paying off a mortgage…now that is something I’d love to do as well. Eventually we will all get there!
HI Lucy:
Truthfully I have three EF funds. One is for the car which I try to keep enough for the insurance ded God forbid we were in an accident and also for anything that creeps up in between yearly car inspections(like an ass who doesn’t clean the ice off his roof so it hits your car but thank God only breaks the expensive wipers and not the windshield or the arm of the wipers),the second is a small medical one just in case and then my real EF. Yeah I am still working on building it up but that is because I am also building my 403B and paying down the last of our bills. I don’t think there is a set amount you just have to go with what is comfortable for you. BUT not so much that you couldn’t knock out a small bill or two instead. It’s all a process
Sounds like you are well prepared for whatever may come your way! As we continue on with our journey, I’m sure that we will continue to tweak our funds too. Before embarking on this journey to rid ourselves of debt, we used to rely on (gasp!) credit cards for emergencies. It feels so good knowing we now have money set aside rather than pulling out the plastic and going deeper into debt. It truly is all a process.