Emergency Fund or Pay off Debt?
Hey everyone! Happy Friday. Today, I have another one of my “short” question posts, mainly because I am extremely nosey. I’m assuming all of you are nosey too.
One of the reasons why it’s taking us a little bit longer to pay off my $38,000 in student loans is because I refuse to touch our emergency fund. I am an extreme worrier and am always afraid that something may happen. We have about 5 months of expenses in our emergency fund (could last a lot longer if we cut things out of our budget), and I want to keep it that way.
Luckily, my student loans will be gone this month, so I don’t really have to worry about this question anymore, but I know that others have questioned what they should do.
Now, why don’t I want to touch our EF? Well, our EF covers many, many things. While I don’t think that a job loss would kill us, a combination of many things happening would. My job is stable, but what if all of my freelancing went down the tank, there was a job loss, something bad happened to the house AND something happened to the dogs?
Well, this is where our EF comes into place. Some of you might be thinking “oh, all of that wouldn’t happen in one month.” But, what if it does? Our EF gives us peace of mind! When one thing goes wrong, it always seems like everything else that could possibly go wrong, goes wrong also.
Some recommend that while you are paying off debt, that you keep just the bare minimum, such as $1,000 in your emergency fund. Others suggest that you build up your emergency fund FIRST and then pay off your debt.
What would or do you currently do? How much is in your emergency fund?
What does your emergency fund cover? Where do you keep it?
Keep Driving An Old Car or Buy A New One
Gary Dek is a writer for Gajizmo.com who is always looking for ways to make and invest money. Gary has previously worked for an internet company on their M&A team, as well as in investment banking and private equity.
While an old car may seem to save on monthly expenses since there is no car note and often no collision, comprehensive, or gap insurance coverage premiums, the cost of repairing a car with little monetary value may be greater than the cost to replace the vehicle. Plus there are the awesome benefits of buying a new car, like a 2013 Camaro 2SS, though a car that fast would get me into a lot of trouble.
However, the decision to replace a car may not be easy. As a car enthusiast myself, I struggle with the urge to buy a sports car multiple times a year, but instead opt to invest my cash. If car breakdowns are making it difficult or impossible for you to get to work every day and putting your job in jeopardy, the car is probably costing you more than a replacement would.
Buying A New Car
While in most cases it is best to buy a late model used car, new car dealers often offer extremely low interest on 60 month loans for qualified buyers, sometimes as low as .9% or 1.9% APR. To be a qualified buyer, you must have excellent credit, which is why it is smart to learn what a good credit score is 12 to 24 months before you plan to purchase a vehicle.
Never finance the cost of sales tax and always have a reasonable down payment ($5,000 or more, if you can afford it) when buying a new car to avoid being upside down in your loan. If you have to drive to work every day, it pays to put money aside each month to cover the down payment since you know you will have to buy one eventually.
When picking a car, choose a make and model that fits your budget and is designed to handle the type of driving you will do. If you drive 20+ miles round trip in traffic on a daily basis, work in an office and don’t transport a boat or ATVs on the weekend, buying a V8 truck isn’t a practical or logical decision.
If you just got a promotion and started making $200,000 a year as an executive at a medium-sized business, do you really need to show the community you are successful by buying a luxury $80,000 car? Just because you can afford up to X dollars per month in car payments doesn’t mean you have to spend that amount. For me, real monetary success is measured by how much money I have in the bank and in investable assets, not the amount I’ve spend on consumer products that will likely never appreciate.
For these reasons, my general rule is: if I don’t absolutely need a new car because my current one is unreliable, I will only purchase one if I could afford to pay 100% cash, or pay off the note within 6 months. This doesn’t mean that I will necessarily use cash to buy a car – I will most certainly finance it so that I can continue to invest my cash at a higher rate of return than my car note (the S&P did return approximately 16% last year).
This just means that, unless it’s a dire situation, why purchase a $50,000 unless I have, for example, $500,000 in investments, where 10% of my net worth would not make a big difference to me. However, I understand everyone’s threshold and financial situation is different, so apply a budget given your own personal preferences. Just remember, don’t be one of those people I see in Los Angeles or Orange County who drive a luxury Mercedes or BMW but pull up to a low-rent apartment building.
$7,641 in May Extra Income – Side Hustles!
My view when working from home…
Hey everyone. Happy Monday! I published my May Goals Update along with my June Goals yesterday. I decided to split up the posts, so don’t forget to read that 
This is a whale of a post today, so make sure to grab a cup of coffee beforehand…
May was yet another good month with extra income. I don’t think any sane person could possibly complain about making approximately $7,641 in side hustle income, especially when everything in fun to do.
I still haven’t been able to crack the $8,000 level of extra income just yet (this is after expenses). Also, May income was below April’s income. However, not by much.
I do have plans to increase my side hustle income since I do seem like I have stalled out. The stalling is only normal I am guessing, since I have pretty much decided that I do not want to sacrifice enjoying life in order to make more money.
I am working on streamlining more tasks in order to have a better work-life balance. I also have added a couple more side hustles that will most likely add up to a decent amount of future side income. One thing that I really need to work on is being better with collecting payments. I currently have a couple of invoices outstanding that total over $1,000, and they have been outstanding for over 30 days now. UGH.
In May, I made $7,859 in extra income, after most expenses. In case you are new to my blog, “Extra Income” consists of all income that I make that does not include my office job that I have in the financial services industry. Extra income also does not include any money that W makes, as he doesn’t do too much for extra income (he just started something last week, so we have not seen any profit from it yet) and he is mostly commission at his work (so it fluctuates every month anyways).
As I say every month in my income update posts: this is not all super easy. None of it is. I spend enough time to make this a full-time job on top of my already full-time job. Luckily, I do enjoy what I’m doing so it’s not like I’m dreading anything. The goals that we have are also a great motivator. I just keep thinking about how badly I want my student loans gone, and also how badly we want a new house next year. Read further on my Extra Income page.
This is for the month of May and after most fees and expenses (expenses were a little over $900 and include payments for staff writing on my blog and work with FITnancials, PayPal fees, etc.) being taken out. May’s number above includes a rent payment from my sister.
