This is real life and things happen that we aren’t expecting. This seems especially true when you are trying to become debt-free. It’s almost as if you take one step forward and two steps back many times during this process. Technically, this is what your initial $1,000-$1,500 emergency fund is for. Your emergency fund should be established before you begin to climb your Debt-Free Ladder so you can continue to walk forward and climb upward during your journey to debt freedom.
If you do fall victim to an emergency while climbing your Debt-Free Ladder and have to use some of your emergency fund, simply pause where you are on the ladder, replenish your emergency fund, and then continue climbing once your emergency is fully funded once again. Yes, this will delay your journey a bit, but it will not derail it entirely, which is what would have happened if your emergency fund was not in place.
Your initial emergency fund is like a safety net to a tight rope walker. If things go sideways and they fall off, they have some place soft to land. It takes them a little while to get back up on to the tight rope, and they have to reset the net, but then the show goes on again. There is a reason we put the emergency fund first. Because if something happens while you are climbing the Debt-Free Ladder and you don’t have that emergency fund to use, you will have to charge the emergency on a credit card or borrow money and then you will become discouraged. What would have been a minor setback becomes a major loss and you lose all of our momentum and motivation.
Once your debts are paid off and you have become debt free, except for your mortgage, you will then build an emergency fund of two month’s worth of bills. You will exclude your mortgage because that debt was not initially included in your Debt-Free Ladder and will be handled later. When you can get two month’s of bills into your emergency fund after your are debt-free, you will be more equipped to handle any emergency that may come your way including medical emergencies, job loss, etc. The premise, again, for this emergency fund is to replenish it if you have to use it at any point.
So, as you know, I write these articles living in the real world where real things happen. It is important to stay focused, stay motivated, keep your emergency fund going and be vigilant.
Please share your journey in the comment section.