As I mentioned last week, I decided it was time to say “Adios” to Sallie Mae and get rid of my stupid school loan. Two years ago my account balance was $28,000 and today it stands at $4,500. I made a $10,000 payment towards the loan last week, which was totally awesome, but my savings account took a huge hit as a result. My savings currently stands at $2,800 in a wedding fund and $10,000 in my E-fund. Now that I am cash ‘poor’ I’m left wondering, What qualifies as an emergency?
Even though I have $12,800 in my savings account right now, I have virtually no spending money. The $2,800 wedding fund is already earmarked for future expenses (second half of honeymoon deposit, groomsmen gifts, etc). The remaining $10K is my emergency fund.
I’m getting married in a little less than four months and don’t really know how to approach the expenses that come with the married life.
I’ve mentioned my goal is to be debt free by the time I get hitched. To accomplish this goal I would have to put every dollar of my discretionary income towards Sallie Mae from now through August. This poses a big problem. If I spend all my discretionary income on my debt, I will have ZERO money to pay for upcoming expenses.
I have one roommate and Girl Ninja has four. Unfortunately, neither of us own a microwave, television, couch, dining room table, end table, coffee table, etc. Most of this stuff is owned by our roommates so once we move away from them, and move in together, we will have NOTHING. There are some things we are going to have to buy as we get married, specifically a queen size bed and other furniture pieces. I’m not quite sure how we should go about paying for these anticipated expenses.
If I use all my discretionary income to pay down debt, I’d have to use my E-fund when buying these necessities. Although purchasing a bed is definitely important, I find it hard to justify as an “emergency”. I want to keep our E-fund at $10K in case a true emergency arises (job loss, vehicle maintenance, family emergency). I would hate to use my E-fund for something like a coffee table and couch, lose my job shortly after, and not be able to put food on the table.
The other option would be to reduce my debt payments to the minimum obligation ($236/month), so I could build up my savings account for a “furniture fund”. We’d then use this fund to purchase all the items we need. Thus preventing the need to tap in to our emergency fund. While this method would keep my E-fund fully supplied, I will pay for that convenience, to the tune of $105 in interest over the next four months. Definitely not an obscene amount, but it still would suck to part ways with that money.
This dilemma poses a pretty important questions.
What qualifies as an emergency?
Would you use the E-fund to purchase the furniture? Or would you reduce debt repayment for a few months to build a cash reserve?