Borrow From Yourself First.
Borrow from yourself first, that's what I say. It sounds funny, but think about it. What if you needed $1,000 or $2,000 in cash right now, where would you get it? Would you pull it from your emergency fund? Take out a payday loan or credit card advance (please say you wouldn't)?
I ask this because people do the oddest things when it comes to getting their hands on money. They'd borrow, steal, and even cheat sometimes before pulling from their own cash reserves. I once knew a guy who'd take out an 8% loan every time he "needed" something instead of dipping into his $5k+ savings account. Why? I'm all for doing what makes you comfortable, but financially I just don't think it makes any sense.
In fact, I had a brilliant idea of listing out all the possible ways you could get your hands on money - in order of need & financial smartness - but after an hour and a half (and going) I realized it's better set for another day. And that day being Monday ;) So go out and enjoy your weekend for now, and we'll get back to this tantalizing list of options upon your return. I'm hoping you like it as much as I do!
I ask this because people do the oddest things when it comes to getting their hands on money. They'd borrow, steal, and even cheat sometimes before pulling from their own cash reserves. I once knew a guy who'd take out an 8% loan every time he "needed" something instead of dipping into his $5k+ savings account. Why? I'm all for doing what makes you comfortable, but financially I just don't think it makes any sense.
We have savings accounts, rainy day accounts, and emergency funds set up for a reason - to have cash available at a time of need.
If you don't pull from it then, then when? We all validate "emergencies" in different ways, but it really IS OKAY to pull from your stash when needed :) I know that sounds crazy, but that's seriously what they're there for.In fact, I had a brilliant idea of listing out all the possible ways you could get your hands on money - in order of need & financial smartness - but after an hour and a half (and going) I realized it's better set for another day. And that day being Monday ;) So go out and enjoy your weekend for now, and we'll get back to this tantalizing list of options upon your return. I'm hoping you like it as much as I do!
Labels: advice, debt, loaning money
posted by J. Money at
9:45 AM
11 Comments:
I agree man! In leading Financial Peace University classes at my church, I have had many people almost skip using it when an emergency comes up. In most cases I am referring to though it was because they weren't used to even having one. In others, it was because they felt emotionally affected by the thought of taking from the fund they spent so much time to put in place.
I have to say it feels REALLY GREAT when life happens and you have an emergency fund set aside to cover it. It reduces stress people! :)
ug. i'm still learning this. had decided to charge my whacked-out cell phone bill (on my 0% card, but still) while i have more than enough sitting (and sort of forgotten) in my savings. but it does hurt! ouchie!
maybe i'll learn one of these days. hopefully.
I agree, borrow from one of your savings account, especially if you know you can afford to remove money from there for the time being. I recently did this from my vacation fund when I need repairs on my car.
I think for some people it is more disheartening to see the big number from their EF that they worked so hard to build drop than it is to take on new debt. I had that problem a few months back, but jsut bit the bullet and took the money out rather than put it on a CC. It still hurts to see my number so small, but it's also nice to knwo I'm not paying interest on somehting I didn't have to!
I agree with what MK said... it's hard to pull money out of your EF. It makes me sad to watch those numbers drop. But sometimes it's necessary.
Usually what I'll do if I find myself in a bind is put the emergency on a rewards credit card for the points, then when I get home, I transfer the money from my EF to my checking and then make a payment to my card right away.
But it still hurts to watch that balance drop, though! So I totally understand why people would rather put it on credit than take it out of the good ol' EF.
I never borrow on interest(besides my car 4%)..I usually just save up, but I like this idea, maybe even pay yourself some interest? I dont like borrowing from Emergency fund for wants, but if you have saving account I think its all good! I am actually in the process of looking for a new TV - might have to borrow from my saving with a 10% APR to pay myself back back from borrowing.
Once again brilliant J money!
What kind of fool would borrow with an interest rate rather than borrow from an EMERGENCY FUND. They need to be smacked with our national debt J.
it would seem obvious...but for us budgeting babies...thanks for this reminder...i think we often hesitate to borrow from ourselves because we aren't disciplined enough to "pay ourselves back"....as i become better at managing my money, i have realized that i have less "emergencies"....thanks for the useful tip.
Nice post.
E-funds are there for emergencies! You just have to remember to fill them back up in times when there isn't an emergency :)
Kristen
great post! and yes...I agree...people do the oddest things when it comes to money and their "needs"! It is hard to watch your savings funds drop if you need to dip into them...but it sure beats running up more debt. Nothing is more depressing than that in my book. I have actually gotten into the habit of using my ebay paypal account as my "emergency" fund. I let it build up by selling odds and ends here and there, and then when I have a need (sometimes it is a "want" need...) I have a little stash to pull from. I am always shocked at how quickly it builds up over time.
I was listening to a guy in Walmart last week talking about how proud he was about financing a Television set ... I wanted to thump him with my coupon book.
Keri Lyn
Yup, I never said it would be the most fun thing to do that's for sure ;) I used to take out hits on my credit card all the time until I reached XXXX amount in my savings account, but you know what? The number I had selected was arbitrary to begin with! There was no way I'd ever reach it without a gameplan and solid rules (like this one). We all gotta learn at some point I guess...
@Brad @ enemyofdebt - Everytime you leave a comment I learn something new about you brother...Keep rockin' out that Financial Peace University!
@Atlas@mymoneyshrugged - I LIKE THAT!!! If you borrow from yourself, why NOT pay yourself back + interest? Brilliant.
@Kaitlyn - haha...well unfortunately you'll be smackin' up a loooooooot of people then ;)
@Keri Lyn @ She Saved - EXCELLENT Idea! It's all "extra" money anyways, so why not? I do that a bit with my paypal account too from money I earn off this blog...that random cushion sure does help every now and then.
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