Monday, August 14, 2006

I Have Been Told That Many People Have Opinions About What Other People Should Do With Their Money

So there's all sorts of debates about whether you should save for an emergency fund or pay down debt first. Some say, hey, if you pay down those debts, you'll just charge them back up again, you need real money in the bank! And some say, if you don't have debt service, your monthly payments are gone, so your emergency fund can be smaller! Yet others say, to hell with it! Where are the chocolate-covered bananas?

Obviously everyone is entitled to their own opinion, but it interests me to see how much attention is paid to the logical, numbers-crunching side of the game, and how little to the emotional side. This is the direction that Money and Values is heading in, but I think it's worth it for the rest of us to examine why we do what we do with our money too.

Money is fraught with emotions, and depending on what emotions you've fraught it with, you'll have different responses to this debate. My personal feelings about money have to do with safety. Money is there to help me if something goes wrong or something expensive and unanticipated happens (thanks, pig.) Only in the most immediate sense do I have money to buy stuff. Yes, that's what you end up doing with your emergency fund if you lose your job - you buy food, electricity, gas, clothing - but for me the emergency fund is there to buy me safety. It means that I am always at least $2,000 worth of needing stuff away from going into debt.


Flexo said...

Emotions do play a role, which is why the "one size fits all" approach to finance taken by certain published financial gurus really doesn't work.

ChippingAway said...

well, to be honest, unless you can pay rent or mortgage with a credit card, you really should have an emergency fund. Just about everything else can be paid for with credit. Groceries, utility bills, emergency medical expenses, prescriptions, and basic transportation needs can all be coevred by whipping out the ol' plastic. but rent/mortgage is trickier, and most likely requires cash on hand (unless you could do a balance transfer from one unused card to another, and get the cash that way... but that's a different topic). if you're worried about what would happen to you in the event of suddenly becoming jobless, etc... it is probably best to have a minimum of a few months of your rent/mortgage stashed away. Anything above that is personal comfort. :-)