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Monday, February 18, 2008

No Emergency Fund = Limited Options

It is all well and good to talk about Baby Step #1, getting an Emergency Fund, but things can and do happen as you are building that fund. We all know the drill, you get that first $75 in the Fund, start thinking about, “How you are really gonna do it this time”…and then your car acts up; $200.

What are you going to do?

We were in the exact boat five years ago. It was winter; we weren’t controlling our spending and living paycheck to paycheck. And as Murphy’s Law works, we had a series of those Ninja Bills that I always talk about. Also, we had written too many checks and were going to overdraft our checking account.

The stupid part is that these were due to not tracking our debit card purchases. She and I were spending without seeing what the other was doing by only checking what the ATM had showing!

So these five overdrafts were about $100, but the penalties at Wells Fargo were going to be $25 per item or an additional $125…$25 more than the checks. Regardless, we didn’t have $100 much less $225!

We looked at the following Options:

  • Credit Card Transfer – We didn’t even have enough credit to do this.
  • Direct Deposit Advance – My check was (and is) Direct Deposited and Wells Fargo offers an Advance on the amount, but it costs $20 per $100 borrowed! For two weeks that 520% Interest!
  • Payday Loan – The horror stories you see on the news scared us off.
  • Borrow from Friends – Too new to the area. A bit, awkward asking a new co-worker for money!
  • Sell Something – This is what we decided on. We sold some used video games and DVD as well as old jewelry my wife had.

We paid the debt, but it was really humiliating. It taught us though that you have to have something, and if you don’t, you have to be prepared to make some sacrifices.

(This post was paid for by National Payday)


minimum wage said...

Being poor is expensive.

Anonymous said...

Hey RacerX...
I tagged you with the link meme - good for building up technorati authority - check it out on my blog!

RacerX said...

@ Minimum Wage - Thanks for Visiting! You are sure right. Even food costs more. You cannot afford to buy bulk where you could sve money!

@Dawn - Cool! I will check it out!

minimum wage said...

Back in the 1960s, someone wrote a book called The Poor Pay More. It was apparently very popular with college professors; most college libraries seem to have at least a half dozen copies.

A few years ago, someone wrote a followup, The Poor Still Pay More.

RacerX said...

I remember the original, but I didn't know there was a sequel. I will have to check it out.

Thanks for Commenting and visiting!

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