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EF Refunding Update

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Hey everyone. I hope you are all having a great day.

On Friday, I gave a short update on where I stand on refunding my EF- I’m currently at $1,300 with my goal being over $2,000. There’s an item on the horizon that have me worried about keeping my EF any lower- I have a state inspection for my car on November 9th. After talking with the mechanic over the summer, he let me know that to pass inspection, I’m going to have to have a bunch of work done. In the range of $500-$1,000 of work. Depending on the cost, I’ll most likely just pull this money from my EF.

In the meantime, I did get a credit card to help me if an emergency arose. Thankfully, at this point, it hasn’t. I’ve owned credit cards in the past (those terrible mall store cards that give you 10-15% off when you sign up. Never used them but the one time. I’ve since cut the cards up, but the accounts are still open) but never a card with a sizable limit. Not only did I read many articles and see the ill effects of poor credit use for myself, but the cards I had in the past only had a limit of $100 and $150- not much in an emergency, hence why I never used them; they just weren’t worth the trouble. Anyway, I had a meeting with my bank a few weeks ago (the same meeting where the person inquired as to who Navient was), and since I could see and feel my EF dropping, I acquired about a card I could use to get me through any tough times while I built my EF back up. They sold me on the fact that the card is tied to my checking and savings accounts, which would make payments instantaneous, and I could pay off the card as soon as I bought something with it. I experimented by buying some gas to see if this were true, and it turns out that it takes a few days for the purchase to post. While it’s great my payments can be transferred from my accounts instantly, it doesn’t matter much when my purchases take a few days to appear. The card has a 1.75% cash back bonus, but I don’t intend on using it now or once my EF is back up.

This past week, I manged to seal the windows and doors I wanted to in hopes that this will help make the winter a little more bearable. I used the Duck Tape brand, which was fairly inexpensive.

I have 2 more weeks until I will begin paying down Sallie Mae 01- I can’t wait!

Matt

Hi! My name is Matt and welcome to Blogging Away Debt! As one of the bloggers here, it's clear that I'm in debt, but how much in debt, you may ask? Well...when I graduated college in 2009, I nearly fainted when I saw the price tag- $110,000. $110,000! For school! Add to this my car loan and my total debt topped $126,000.

In September of 2013, I had an epiphany to pay of the remainder of my debt ($104,000) as fast as I could. With my sights set on a debt free date of November 2016, I'll share my journey with you to reach this goal, every step of the way.

Latest posts by Matt (see all)


19 Comments

  • Reply TENN |

    I would recommend calling each of the cards that you cut up, cancelling the account, and getting a letter that says it was closed. Many may already be closed due to inactivity. Checking your credit report (free) may let you know which ones are still open. There may be some benefit to keeping the oldest one open, but not sure if a store card works the same as a ‘regular’ card.

    • Reply Matt |

      TENN, I’m not closing the accounts- they are my source of longest credit history. I don’t see any benefit to doing it at this time. I check the on-line accounts of these cards at least once a month to make sure nothing fishy is going on, but other than that, they don’t cause me any type of stress.

      • Reply TENN |

        I didn’t realize that you do check on them. I thought you just cut them up and weren’t checking to see if ‘anyone’ was using them.

  • Reply Den |

    I’m conflicted about having a credit card for emergencies – that’s how a lot of people get into trouble. But hopefully you won’t have to use it and your EF will get built back up quickly. And in a way, kudos to you for thinking ahead and being proactive instead of responding in crisis!

    • Reply Matt |

      I def agree with you, but I’m won’t be using the card at all once my EF is back up. I’ve only used it the one time to see if the card works like my bank told me it would, but I’ve since put it away. My EF will be back up to my comfort level next week, so I only have to get through another few days. *Knocks on wood*. LOL.

  • Reply Judi |

    I second the suggestion to get a free credit report, you can do it once every 3 months if you switch around the various agencies. Also, why exactly do you choose $2000 for an emergency fund? I’m just curious, I like 3 months living expenses for myself, while others follow Dave Ramsey’s suggest of $1000. Did you do a calculation like the cost of your most expensive likely emergency? Or just personal experience?

    • Reply Matt |

      Hey Judi- the only reason I’ve chosen the $2,000 mark for my EF is because that is the threshold that I can personally tolerate before I stress about it. I’ve learned this by experiencing it myself. Any higher and I would just have money sitting around not doing anything for me (like paying off my loans) and any lower, I start getting fidgety about it. I think it’s all a matter of what someone is willing to live with. I know a lot of people who have much lower thresholds and also know some (but not nearly as many) that like to have 3-6 months worth of savings. It comes down to personal preference.

  • Reply Jean |

    I’m curious as to why you’re using your EF for car repairs that you know are coming. Couldn’t you just save that money in a separate account? I know everyone is different in how they see/handle their accounts, but planned/known repairs don’t really constitute an emergency.

    • Reply Angie |

      I second this. You’ve known about the car repairs since the summer. Why haven’t you saved anything towards them? Why is Nov 9th a deadline? If you’ve known about them you should have been able to get quotes, see if there is anything you could do yourself, save some money, and have them fixed BEFORE the inspection. Are you just trying to buy more time to delay the expense?

      Although I can’t be too hard on you though because I used to do the same thing myself. Felt it was better to keep the bare minimum buffer in my checking accounts to pay less on interest on student loans. But my loans at the time were 9% so the interest was adding up fast.

      • Reply Matt |

        Yes, I def get what you are saying, Angie. I’ve known about the expense since the summer, but it came down to priorities. My 1st priority was paying down Sallie Mae 04 by October- which I accomplished. My second priority was to rebuild my savings and prepare for my inspection. In order to accomplish #1, I had to forego #2 for a couple of months. Once I accomplished paying off that loan, I scheduled my inspection for the closest day after I knew I would have the money saved up- this happened to be November 9th. I have to go get it done, regardless, so I don’t see too much reason to delay the inevitable.

        Unfortunately, I have 0 expertise and 0 interest in performing my own car repairs; with my luck I’d probably make things worse, lol. I do trust my mechanic, though, and the quote he gave before is within reason of the research I did online.

    • Reply Matt |

      I could do this, but it wouldn’t change the amount of savings I have total. All I’d be doing is changing the name of my account from “Emergency Fund” to “Car Repair Savings”. It would change by name only, so it’s not worth the trouble, for me, to have various accounts which add up to the sum of my savings account.

      • Reply Jean |

        So what you’re saying is that you have a savings account, but not a true Emergency Fund? I see those as two separate accounts. If I want to save for something specific, it goes into a separate account.

        • Reply Matt |

          Yes, that’s what I’m saying. I have one cash savings account, tied directly to my checking account. I lump all the savings that I want in cash into this one account- I find it easier than having a bunch of separate savings account. It’s all personal preference and how you have your finances set up.

  • Reply Angie |

    Definitely do not cancel the unused cards. Leave them alone. Check your credit report through credit karma or the free agencies to ensure they aren’t compromised. As someone who is still young, the length of credit history is a factor in your score. So those old accounts could actually be giving you a big boost. My credit score went down when one of my first cards got cancelled for inactivity.

    • Reply Matt |

      Great advice. I do check my reports once a week with creditkarma- they offer a great service. I’m actually quite surprised that my two cards (which I’ve only used once) have not been closed for inactivity. They are actually my oldest accounts, going back to 2005 and 2008, so you are probably correct in that they are boosting my score.

  • Reply Kelly |

    My local radio talk show host Clark Howard does not recommend having your credit card or mortgage be with the same bank you hold your checking or savings accounts. If you are late or miss a payment they are able to just remove what is owed to them from your accounts . This often causes people more trouble with additional fees because it can overdraft your account and bounce checks. Definitely not helpful if your already having a tough time financially.

    • Reply Ashley |

      That doesn’t bother me so much (though I’m OCD about paying bills on time so I’m never late). But I did think that, in this day and age, the idea of keeping them together for ease of bill pay is probably not that big of a deal. For instance, I have a CapitalOne credit card. There’s no physical bank at all, yet I have no problem paying my bill online through bill pay. Quick, easy, and free. No need for it to be tied directly to my Bank of America or Wells Fargo accounts (for example). It’s all moot now since the deed is done, but good info to know for the future maybe.

  • Reply Joe |

    I’ve written many times in comments on this blog defending the judicious use of credit cards so I won’t rehash that! I do think that Matt’s usage case is even much more judicious than most responsible credit card users so bravo for that. Being able to access some additional funds quickly in the case of extreme circumstance is very important, in my opinion.
    I’ve switched completely over to my Visa that is with my bank that we do our checking. It is so convenient, even beyond the greatness that is Electronic Bill Pay, to be able to do a simple transfer to instantaneously cover the balance. I would say that if your financial situation is such that the danger posed in Kelly’s post above resonates, it is likely that you would want to steer clear of any credit cards altogether anyway!

    • Reply Matt |

      Agreed, Joe. Thanks. The one time I’ve used my card, I must say that it was really convenient and the transfer made between my checking account and credit account was made instantly.

So, what do you think ?