Go to the ant, O sluggard, Observe her ways and be wise, Which, having no chief, Officer or ruler, Prepares her food in the summer And gathers her provision in the harvest. (Proverbs 6:6-8 NASB)
I submitted our budget to a forum of Dave Ramsey aficionados and was sickly relieved when they were all stymied. Yup, the internet confirms that I’m in debt up to my eyeballs and don’t have a lot of options (other than to get paid more)… But I’m not discouraged!
The ever-popular Dave Ramsey’s first get-out-of-debt baby step is to build a $1,000 emergency fund and then you roll into paying off your debts. After you’ve done that, you build up 3-6 months of emergency expenses. Sounds logical, and yet these steps always tripped me up.
The $1,000 was always easy. We had it in hand. No problem. But when I thought about only having $1,000 in the bank to cover us for the next 10-ish years while we paid off student loans… Well, I got too nervous. My (suddenly) miserly little hands tightened around my checkbook and I couldn’t move ahead in the process. Too be fair, Dave will often say that some people might need a little more than that, but the $1,000 amount is listed in the steps on his website and in his books and he quotes that figure a lot. I’m a rule follower and $1,000 felt like the law.
So then I read Steve Diggs’ No Debt, No Sweat! and learned of a similar set of steps, but ordered differently. The first step is the same – save up $1,000. The next is to save up about 5% of your “true” income for a “Murphy Fund” (Murphy’s Law states “anything that can go wrong, will go wrong”). Only after this buffer is built do you start paying down debt. Whew. I can do that! Our Murphy Fund will need to be about $4500-5000.
So, I’m going to challenge my husband and I to have a Murphy Fund in place by the end of June. If we should find extra money, we can’t spend it – we will put it straight toward our smallest student loan, which will be our next challenge.
This means I actually need to see how much money we have in the bank and how much of it is really spendable money – not money I need to carry forward to pay car insurance, for example. If we don’t have the cash readily available… Well, looks like we will be selling some things.
I’m happy we completed our budget (I’ll need it for this step), but getting this Murphy Fund in place will feel like momentum is rolling! Paying off those student loans and staying home with the girls will seem that much more doable 🙂 With this being my first full week back at work, it’s good to have a goal in place to keep me focused and encouraged that I can change my circumstances 🙂
Which system do you prefer? Just $1,000 saved up? Or would you need more to make you comfortable?