I've new and have a few questions

[Dexter]

We are in debt. We live paycheck to paycheck. Well, we're usually short and rob peter paul and mary to pay whatever it is that needs paid. lol

My question is that during all my reading on various websites, it's finally sunk in that we need to have and emergency fund and a freedom acct. My question is which do I do first? Set up the EF, the FA or work on paying more towards our debts.

I did open an ING savings account last week and it has $25 whole dollars in it. LOL It's a start. I just don't know what that account is for... EF? FA?

I guess I'm just looking for advice and ideas.

Thank you all so much for all your wonderful threads. I am learning so much here!

And, I really like this smilie ---->

[nuisance26]

~My first advice to you is to spend less. If you're always short it means you're spending too much and there simply won't be anything left to save. Try going the whole month without buying clothes or renting videos. Don't eat out. Just a few changes should free up $50 to save. Use it to fund your emergency fund. Having cash for urgent, unexpected expenses saves you from adding to credit card bills. Get the account up to at least $500 before tackling your debt. And whatever you do, DON'T use your credit cards! You can do this! ~

[Valerie in WA]

My opinion is that you need a FA first. A FA is for expense that you know will occur, but either occur irregularly or unpredictibly. An irregular expense might be your annual renters/homeowners insurance. An unpredictible expense might be physician and prescription co-payments (odds are most people get sick sometime, right?). Another example: I set aside a few hundred a year for car maintenance. Last year it was tires, this week it was brakes. Who knows what it'll be next year, but I bet it'll be something.

I feel that if the FA is funded and in place, I can deal with those little issues. If I don't have a FA in place, I would constantly be dipping into the EF to meet those needs.

To me, the EF is for unpredictible things: job loss, injury/extended illness, your car is wrecked and you have a $500 deductible. That sort of thing.

I like that smilie too!

[PrairieRose]

My humble opinion is that you need the EF first. It always seems that as soon as you start to really buckle down and get serious with your finances that emergencies come out of the woodworks from every direction. Fund that emergency fund, when you get it done start on your FA. Go to the library and get Dave Ramsey's book Financial Peace and follow his advice to the letter. I can tell ya from experience that it works . We're not completely debt free but we're almost there. We've paid off over $150k in debt and did most of it in 3 years by snowballing. Good luck, don't let yourself feel deprived, look at it as a game that you're gonna win no matter what, by golly. You'll get through it and be so much stronger when you do

[dcompton]

I would just focus on getting some money saved -- the label is not so important. Why not for the present, just think of it as the EF/FA, because whatever comes up, whether the things that usually would fall in an FA account, or the catastophic ones that we hope we never have to actually use the EF for, will all have to come out of this pool of money. Later, when you get more saved, you can think about how you want to divide it into separate accounts.

Or, if you want to condition yourself to thinking of the EF as inviolable except for roof-caving-in emergencies (and that might be a good idea) call this one the FA. You know those things will come up, and it could, of course, also be used for real emergencies too -- money is money. When you get a comfortable balance in it, start a separate account for the EF.

The really important thing is just to have a cushion against the unexpected, and to prepare for things we can expect. You're doing that, and that's a terrific start. I bet there are a lot of substantial EF's out here in the Village that started with $25. Mine isn't substantial yet for sure, but it began very small too. You WILL be able to make it grow!

[jamie79]

I would like to add by reading your post that you need to cut your expenses or increase your income. If you have more going out then coming in that is not good. Dont go out to eat, cut your grocery budget, get rid of the cell phone, cut the cable bill etc. Sometimes you have to deprive yourself a little to get back on track. Once you get back on track then you can go out to eat once a month ( or rent videos, etc)as a reward
I also agree that it doesnt matter at this point what you call your savings but do save some money for the unexpected.

[bee9984]

When dh and I first started out, one of the first things we did was start a baby emergency fund , it still isn't a very big amount as we did have some emergencies occur along the way, It did feel so good though knowing that we could pay cash, like when we had to buy a new to us van, $500 insurance deductable for water damage to our basement, emergency vet bills, etc..... All paid for in Cash For our Freedom account I usually pay them as they come in anyhow as there isn't anything which amounts to a huge total. but I have tried to start it back up and running.

I would definately get the baby emergency up and running as fast as you can. there are members here who sell books etc on Ebay I am sure they would be more then happy to answer any questions you may have if you decided to try that. Maybe go to your local library and borrow the book Dave Ramseys "Total Money Makeover"

If you get a chance look for David Bachs "Automatic Millionaire" book as well. I havn't read that one but I have read his "Start Late Finish Rich" book as dh and I are now in our 40's. It was a very good read. He prints his book with the American and Canadian versions.

I would also start a change jar, we did this and every couple or few months we were able to take the kids out for a nice buffet dinner at a restaurant. We drank water though so we could speed up getting to go and not have to wait the extra couple of weeks or so it would take to cover that fee.

So we didn't feel deprived every friday or saturday night we would have chip/pop and cheap movie night. We would rent the older movies as our library doesn't carry them and we would buy the cheapest chips and pop. Sometimes we would skip the movie and play board games. We went on alot of picnics durring the warmer months. I would check in your area for free entertainment etc....

We had cut back as much as we could, we don't have call display/waiting/answering machine service etc on our phone....we have basic cable, no cell phones, I read everything in which to get my hands on with frugal living, frugal mixes, cook once eat twice, being content with what we already had, if I wanted a change say for the living room back then I would rearrange my furniture, pick wild flowers and put in an old vase I had for my kitchen table, I did splurge once in awhile and would say go to the dollar store and buy a few doilies to put on the arms of my chairs etc. We still use a thin sponge for our dryer dipped in the store brand liquid fabric then gently squeeze so that there is a bit of softner still in the sponge to put in the dryer if I couldn't use the clothes line for whatever reason. I shopped at value village, still do and I only buy clothes 2 times a year at the most but I do buy our under garments etc at walmart when needed. If you need an inspirational note or something find one and write it down, put it in your wallet so that everytime you go to open it you see that note also you can print it in bold letters and put it on your fridge door for you and your dh to see , I had written in my wallet when first starting out on this journay "Buying what I want now will often result in later needing what I can't buy". I remember thinking, what if the children get sick and I need to buy them medicine?

Anyhow, that is just some of the things which I can think of from the top of my head when we first started out on our journay. We have never lived from Pay to Pay since

You will be amazed how creative one can be once either (1) you have no choice or (2) you have a goal in which to maintain like being debt free and to have a piece of mind.

[nwmissourigal]

I agree with cutting back on the spending. If you are living paycheck to paycheck there has to be some small things you can cut out. Also look at what you spend on groceries...if you are buying alot of already prepared food trying cutting that out first and cook from scratch. It really doesn't take that much longer. Good luck and I know you will figure it all out and we will all be here for your....Blessings...Kathy

[zasoror1]

I agree with everyone. Here's what I did:

1. Track your current spending.

2. Create a budget based on your current spending and modified for areas where you can limit your spending.

3. Start a baby emergency fund: $500-$1000.

4. Begin paying down your debt.

[Dexter]

Thank you so much!

We currently don't have cable, phone is bare minimum no call waiting, etc. We do have a cell phone but it's at the lowest plan. I'd get rid of it but we live rurally and I would worry about driving without it. Dh eats for free at work and I bring leftovers. The kids are on free lunches. Hmmm.

I will start tracking spending to start and see where we are at.

bee9984, you have some great ideas.. I especially like the note one.

[Jill B.]

I think that having a savings account for the EF/FA and not caring what you call it, is a great idea. After you start budgeting every month and learn to figure out how much you need in a FA, you can put away a set amount each month.

We have a $4600 EF (due to fluctuating income) and I put $300 a month in the FA. (Right now it is only at $550). I figured out the $300 by estimating what we would spend on Dr.s bills, car repairs, children's activities, quarterly sewer/water bill and annual life insurance costs. Then I divided by 12. Thus, $300 per month.

Good luck!

[tigo]

I am in the same boat you are- cut everything back as much as we can. I was stumped for a while on how to cut back any more than I already had. I started following the loss leaders (really tough that first month trying to only buy those things and absolute necessities but it does become easier). There really wasn't any splurging going on but the income is just not going any place fast. I started refunding (Walgreens, etc) and every one of those checks got split in two- half for the EF/FA (I only have one account right now) and half on debt reduction. I bet the folks at the credit card company laughed at my check for $3.25 as an additional payment but my thought is every penny counts!

[cheappearls]

Everyone else has great ideas so I won't repeat it. But I know the big part of the money we were spending was to the electric bill. Turn off lights when they are not needed. Set the thermostat down (I try to keep mine around 65º) and put on a sweater and socks.

Turn the temp down on the water heater so it's not working all day to keep the water super hot. Or if you can, put on a timer set to turn the water heater on when you need it. Like have it click on an hour before morning showers to heat up the water then shut off when showers are done and again at night if needed. Most dishwashers heat the water on their own so you wouldn't need to worry about that.

See about washing in cold water for most things (sheets and towels should be washed on hot to kill dustmites and germs). I really love my dryer so I won't use a clothes line but I try not to over load it so it's not working so hard to get everything dry.

Just a few ideas to help cut down costs.

[claudia1]

Good luck! I'm new here too and I'm learning a lot. I tracked my expenses last week and found that I'm spending $15.00 on breakfast tacos and snacks at work hmmm--this week I've only spent $2.00 - it's a start.

[frugalfriend]

Check out the book The Tightwad Gazette by Amy Dacyczyn at the library and follow her advice. It should help you free up more money to fund your EF. Every little bit counts! It was real eye opening reading for me! Informative and fun too!