Why I DRAINED My Emergency Fund To Pay Off Credit Card Debt

Рет қаралды 1,632

Күн бұрын

Should you pay off your credit cards before building an emergency fund?
In this video, I present a daring perspective on managing credit cards and emergency funds, drawing from my own journey. Through personal anecdotes and insightful strategies, I delve into the hurdles of credit card debt, emphasize the significance of clearing credit card balances before establishing an emergency fund, and offer practical financial stability tips. Join me on this voyage of financial enlightenment and empowerment as I navigate the intricacies of debt management, savings, and responsible monetary practices.
00:00 Introduction to the Controversial Credit Card Strategy
00:26 The Personal Journey Through Credit Card Debt
02:05 Why I Still Use Credit Cards: A Strategic Approach
02:57 Controversial Advice: Pay Off Credit Cards Before Building Emergency Funds
03:58 Analyzing Credit Card Debt vs. Emergency Funds
06:03 The Strategy for Paying Off Credit Cards and Building Savings
09:13 Personal Reflections and Encouragement

Пікірлер: 24

@TheJDgaff Ай бұрын

I always looked at cards as an emergency fund. I never racked up insane credit card debt but I did get up to like 5k when I wasn't making much. I was very nonchalant about how much I was paying in interest, but I always made payments. I still have some CC debt but I've made substantial payments the more I continue to get my life together.

@WakingUpDreams Ай бұрын

Thanks for sharing your story! I'm rooting for you to get that debt cleared as soon as possible. Each time I got out of credit card debt, it really felt like a weight was taken off my shoulders physically. I couldn't believe what a toll it was taking on me. Keep at it and best of luck to you!

@callmeNeno 26 күн бұрын

Great content; I build 1k emergency fund first then attacked my 3k credit debit. Debit free is priceless and you’re in control of your destiny.

@WakingUpDreams 26 күн бұрын

It's quite amazing that so many things change when you get debt free. Congrats on your journey to getting debt free!

@terryhenderson424 Ай бұрын

I more agree with you than some of Dave Ramsey. I've concluded that Ramsey's $1000 Emergency Fund first strategy is to get folks used to living within thier means within a budget as it is anything else. Ive done this and am coming to conclude over time that a smaller, Unplanned Expense Fund is pretty important and all the more so as folks begin to budget for the first time and/ or in a long time; especially if they are cutting things close and don't have much cushion. At the onset, many people forget something and most people need to determine if the budgeted amounts are at all realistic; this is where the Unplanned Expense Fund comes in. I prefer Unplanmed Expense because the intention is not to buy that cute or handsome top littering a main walking aisle in the store which you might use a Miscelaneous Fund for. Ive seen folks struggle to get to $1000 dollars of savings while dying a death of too many minimum payments both in number and also in cost. You only return dollars to the budget by reducing and eliminating minimum payments or elsewise reducing your expenses. In part the better or best answer includes consideration of the debt profile at hand and the amount of available cash flow .

@WakingUpDreams Ай бұрын

100% Agree... Thank you so much for taking the time to comment! I will need to do a full budget plan guide one day that has a few most common scenarios people are in today. I've pretty much lived all the different scenarios from poor (or no) money management to aggressive paydowns with "gazelle" like intensity and all the in between.

@terryhenderson424 Ай бұрын

@@WakingUpDreamsFor those who are disciplined out of will or also due to circumstances .... Please address the concept of a "puddle of money" versus 100 million different cash envelopes each with an inadequate sum, and too many sinking funds to be functional. Three related but different concepts are budgeted cash envelopes, caps on cash envelopes, and phased sinking funds. An example of a budgeted cash envelope would be Christmas or gifts. You begin with a list of what and/ or who to buy for, assign a dollar amount to each line item, tally it up; and all too often adjust those numbers. Car maintenance would be similar with a costed listing of should be oil changes, tune ups, tires, brakes, etc.... A cap then would be the amount needed to cover the budgeted items. A phased sinking fund could be the Emergency Fund in which you go for the $1000 with one level of emphasis, add an additional $500 with an different level of emphasis, etc... Or you begin with a general Emergency Fund with a cap; say that $1000 amount. Then you figure the most likely , costly emergency need like say an honest vehicle repair, medical bills, home appliance replacement. Once the priority is established you begin saving for a targeted emergency one by one with each being a phased emergency fund or independent funds. Of course this must be juxtaposed against debt pay down if debt is an issue.

@StevenWatanabe Ай бұрын

Took that Dave Ramsey course and got out of debt. Been out since then. Good program! I still use credit cards though :)

@WakingUpDreams Ай бұрын

Same...While taking the Dave Ramsey Financial Peace Course, I did cut up and shut off cards to get focused. Once that was done though, I realized that we could use them wisely and really take advantage of the perks cards give without going into debt. Plus, it's so much easier to track our spending and organize our finances with credit cards.

@kenyu4258 13 күн бұрын

Save y'all 10 minutes of your life... simple answer: CC charges compound interest of ~25%... Can't think of any investment that will give you that type of returns, let alone a bank account with the Emergency Fund.

@WakingUpDreams 12 күн бұрын

LOL!😂 Perfect summary! Too true.

@extrastops Ай бұрын

Thanks for Sharing!👍

@WakingUpDreams Ай бұрын

You bet! Thank you for watching and commenting! I really appreciate it.

@73ocampo Ай бұрын

Hello from Oregon, this topic has been on my mind for months now. There's no right answer either for each individual. However, I agree w/you. I had to use a card last month for car service, not shopping but to fix my car LOL. I'm pretty good w/my AMEX card. I use it once a month to go out to dinner, then pay it off. I like this approach to pay off the cards first, it really does make sense to knock them out. Another topic I learned was to save for a vacation a year in advance. I had to learn the hard way, but $1600 is not that bad. Thank you for the video, NEW SUB!!

@WakingUpDreams Ай бұрын

Thank you for watching and taking the time to comment. Car services are always the big unexpected expenses that bite us every few months or so. I totally feel you. We feel vacations are a necessity for sanity and we do tend to go without budgeting properly but we’ve done well to still not go into debt over them. I definitely need to make sure there’s a comfortable budget for the next trips. Thanks for the Sub and keep it up!

@73ocampo Ай бұрын

@@WakingUpDreams Thank you!

@RixRunIt Ай бұрын

Great job!!!

@WakingUpDreams Ай бұрын

Thank you!! I appreciate you taking the time to watch AND comment!

@BigBroDre Ай бұрын

No lies told here, great video good Sir 🫡

@WakingUpDreams Ай бұрын

Much appreciated! Thanks so much!

@saraibucciarelli1821 29 күн бұрын

Love Dave Ramsey but I use credit cards and pay in full each month. I'm not putting debit card purchases on the Internet.

@WakingUpDreams 29 күн бұрын

Im exactly in the same camp as you. I love Dave Ramsey too, but would also never use a debit card for internet purchases where my bank account could get drained. Credit cards are dangerous for those who are not able to stay out of debt and very costly, but if a person is able to pay them off every month, there are a ton of benefits to take advantage of. My wife and I are going to Japan and her ticket was free due to points. Last year I flew there for free and we also got over $1200 in cash back from credit cards and never carry a balance on them. Not to mention some of the protection you get with some cards offer great peace of mind. Thanks for taking the time to watch and comment!

@wlonsdale1 Ай бұрын

What happens if they cut your limit or close your card?

@WakingUpDreams Ай бұрын

That is definitely a risk. If that’s a possibility, then you’d definitely have to make an emergency fund first. In my experience, they’ve never cut my limits or closed my cards even with balances in the tens of thousands, but I have heard it can happen, especially if you start falling behind on payments so be sure to use common sense and weigh the risks.