Late Night Temptations
I was looking at Quicken over the weekend. I was really tempted to drain out my Emergency Fund and pay down a credit card.
Friday night I updated my January 2007 Net Worth. While I was looking at my Net Worth IQ graphs, I realized that my credit card balance didn’t have a serious dip in the last 7 months. I have to go back all the way to May 2006, before those damned weddings to find where I made a dent in my credit card balance. In my horror, I decided to try and make huge payments each month and try my best damage control before June when the zero-interest expires on a balance transfer.
The problem is that I have this fat wad of cash in my Emergency Fund and I’m about to spend it against my debt. VERY BAD.
So instead, I decided to sweep a chunk of it into a 12 month CD. I will take the penalty of 3 months in interest if I have an emergency, but it will be worth it to tie up the money so I can’t spend it for a non-emergency. I have to learn to discipline myself. This is just one of my struggles with my finances. I know I dine out too much. I was so conscious of it that I actually bought groceries for myself last week and made an effort to dine only at the cafeteria downstairs at work. They charge you by the weight of your food, so it helps me portion control what I eat and spend less. I can eat well for $4.00-$8.00, probably averaging about $6.00. No tax, no tip so it’s much cheaper than going out to a restaurant. One of my co-workers lives close to the office and she’s been inviting me over for lunch at her house so we can fix sandwiches and watch TV. Hey, to save money, I’ll watch TV!
My two biggest struggles are my dining out budget and spending my emergency fund. What are yours? Are you aware of your financial blindspots? Can you find them with your budgeting tool or your financial statements? I don’t think I would have been as aware of the non-progress I was making on my credit card debt without paging back through my net worth graphs. It really hits home when you see you’ve looked at 7 months’ worth of graphs and there was no progress made at all.
D wrote:
Help, since your little change up, everytime I scroll down to read your articles, there is a box covering part of the article.
It is a MFC ChatBox. Is it your site or me?
Thanks
D
Posted on 07-Feb-07 at 5:42 pm | Permalink
mapgirl wrote:
D- It’s you. You should stop using Microsoft Internet Explorer and switch to Firefox. It looks much better in Firefox.
(No, it’s really the way the layout is coded, but I can’t seem to figure out the problem with IE. And I never use IE. Long story.)
Posted on 07-Feb-07 at 7:01 pm | Permalink
Chitowngirl wrote:
My vice is definitely eating out. With work during the day and school in the evening, I eat out for lunch and dinner and then I buy snacks too. I know it but it’s definitely something that’s very hard to stop.
Posted on 07-Feb-07 at 7:38 pm | Permalink
anon wrote:
beer
Posted on 07-Feb-07 at 7:45 pm | Permalink
Enough Wealth wrote:
I think you should do some work on your financial self-discipline. It really makes no sense at all to keep an “emergency fund” invested at a rate that is lower than you are currently paying on one of your CC debts. Ideally you should have just paid off the CC debt using your emergency fund money. In an emergency you would simply charge the emergency event to the CC rather than using money from an “emergency fund”.
The ONLY problems with that “ideal” strategy are
a) if you fib to yourself and start charging things to the CC as “emergency” items when they’re not. (ps. If you budget properly most “emergencies” go away eg. an unexpected large bill, a sudden car repair, dental bill etc - all these should be part of your budget and accrued for).
b) you let the balance build up again on the CC you paid down using your “emergency fund” money (ie. spend more than you earn). Your CC debt balance should be slowly decreasing if you are living within your means. If you paid CC balance off the remaining balance should then go down even faster as you have less interest being added to the balance each month.
Locking your “emergency fund” money away in a CD isn’t really a solution - it’s just avoiding the real issue of having a bit of a spending problem that needs addressing. It’s a bit like cutting up all your CCs once they are paid off. Instead you should learn how to use CCs properly once they’re paid off (ie. get one with no annual fee, and interest free period on purchases if you pay off the balance in full each month, and a free rewards/rebate program).
As you have already taken out the 12 month CD, I’d concentrate on living within your means for the next 12 mo, and paying off as much of the CC balance as possible (set yourself a monthly CC balance reduction target). At the end of 12mo you can then use the CD money to pay off the CC balance and be confident that you won’t start spending extra on your CC just because you have some credit available.
Regards
http://enoughwealth.com
ps. Firefox is a good browser, but lots of folks still use IE. Having a feature that doesn’t display properly in IE is NOT the same as being “Firefox optimized”. You should be able to get things to display almost identically in both browsers if you code it properly.
Posted on 07-Feb-07 at 8:01 pm | Permalink
Him wrote:
We have one of those cafeteria like places in my building that charges by the weight of the food.
A few co-workers and I tried to figure out what was the best value.
Our answer? Crab rangoon. You can get like, 10 for a pound.
Won’t feel too good after that lunch, though.
Posted on 07-Feb-07 at 9:56 pm | Permalink
Debt Hater wrote:
Travel. Every time I charge something (not that I should EVER be charging anything with my cc debt), it’s often a plane ticket home.
I pay it off before the end of the month, but still…
Posted on 08-Feb-07 at 12:47 am | Permalink
ES wrote:
I agree with enough wealth.
you should pay off your credit cards with your emergency fund. there aren’t any emergencies i can think of where you can’t use a credit card.
if you don’t pay off your credit cards, you’ll never get ahead of the curve.
Posted on 08-Feb-07 at 2:16 am | Permalink
sfgal wrote:
If you don’t foresee any emergencies, why not pay off the debt? you could always use 0% balance transfers if you’re into that thing to borrow money for an emergency …
i’d love to have more clothes, at least for fall/winter. i keep shopping the clearance section and buy tops that really more suitable for spring/summer. that’s my weakness and i’ve been buying and returning too much lately. so i made a list of what i really need and will go look for more winter clothes.
Posted on 08-Feb-07 at 3:04 am | Permalink
Daisy wrote:
My biggest struggles are with wine and impulse food. For example, nothing in the pantry sounds good, so I go grocery shopping for one meal and end up spending $15-$20 on all the ingredients. Big waste.
BTW, I’m very resistant to using my emergency fund for debt payment, too.
Posted on 08-Feb-07 at 3:15 am | Permalink
mapgirl wrote:
“If you don’t foresee any emergencies, why not pay off the debt?”
An emergency is not foreseeable. That’s the point of the emergency fund.
Posted on 08-Feb-07 at 9:51 am | Permalink
Ellen wrote:
Oh, definitely lunches. My fiance and I work together, and since our building doesn’t have a lunchroom, we go out and get food (sandwiches, takeaway thai, stuff like that), to the tune of $13-18/day for the two of us. Every work day! I try to keep the food budget really low for dinners, but it really crimps our savings plan.
I also have been unable to learn how to drive stick, which is the only thing keeping the two of us from going down to one car–HUGE budget savings, considering how often my so-called “reliable” Corolla keeps needing expensive repairs. That’s $500/month right there, easy. Well, easy if I could figure how not to stall out in the middle of traffic!
Posted on 09-Feb-07 at 2:22 pm | Permalink
mapgirl wrote:
Ellen: Give it some more gas and you shouldn’t be stalling. Just keep working at it. You’ll get used to it once you learn the quirks of the car.
Corollas are reliable, depending on age. After about 7 years, I question the reliability of any car.
Posted on 09-Feb-07 at 3:03 pm | Permalink
Bronco wrote:
take a risk and use the emergency fund to knock down the cc debt. easier to build it up after you are debt free.
Posted on 09-Feb-07 at 7:35 pm | Permalink
Tom wrote:
Hi mapgirl,
Eating out is my biggest monthly expense. I am always concerned as I could use that money to pay off debt. But as an older (wise) coworker remarked recently, going out to eat with my friends is part of my entertainment too.
Posted on 11-Feb-07 at 10:18 am | Permalink