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Author: synchronicityII Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308360  
Subject: Re: Problems with my Sentra Date: 9/29/2011 9:58 PM
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All I can say is that my one-year liquid e-fund earning almost no interest was pretty important when I had a long stretch with no work. If I had put all those tens of thousands of $$$ for living expenses on a credit card, and had no e-fund my head would have exploded (being preceded only by many months of sleeplessness before it did so).

But, did you actually have more than one year's expenses worth of CC debt at any time? Because my strategy (pay off CC debt first, then build e-fund) would mean that, well, after the CC debt is paid off, you then would put money into savings.

So, if you had 5K of CC debt, and let's say annual expenses for "stuff" was 50K (everyone can substitute whatever numbers they want), then the way I generally do things, if I got an additional 50K to save, 5K would pay the CC off and the other 45K would go into savings.

If you have 50K of annual expenses, 5K of CC debt, and you put 1K in an efund and then lose your job for a year....well, that efund isn't buying a whole lot of relief.

As for putting emergencies on a CC...I guess I have a higher stress tolerance in that regard, or I just look at things differently. If I've got 5K in CC debt and 1K in an emergency fund and I get 1K in emergency expenses, I don't feel "less stressed" wiping out an emergency fund. In fact, I'd be thinking "well, crap, I coulda just paid down the CC's by that amount 6 months ago and saved myself $350 in interest! (assuming 15% annual CC debt, 1% annual interest on savings)

But again, I'm an irresponsible moron. I have 35K in credit card debt and paid for myself, wife and daughter to fly First Class earlier this month.

-synchronicity
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