Abby makes one point that I totally agree with, and have practised for years: Base your budget on paycheck frequency. When I got paid once a month, I paid bills once a month. When I got paid twice a month, I paid bills twice a month, weekly, paid bills weekly– and when I got paid three different times a week last August, I paid bills three times a week.
Where Abby and I differ, though, is the Emergency Fund. She does very pretty math which points out that yeah, if you pay more money to your debt, your debt goes down faster.
However, and this is a big however. Abby says:
Throwing all your money at debt is better for you if:
- The amounts you pay on debt are far enough over and above the minimum due that you can make smaller payments in the case of unexpected expenses.
- You pay with each paycheck to give yourself added flexibility in dealing with “surprise” costs.
- You don’t get these “surprises” more than two or three times a year.
Even after *counts quickly* nine months of Fangirling my Finances, and many more years of worrying about debt and money and whether I could afford to eat the fancy Ramen for dinner, in my world surprises show up about two or three times a MONTH. Such as the $350 check I’m sending to the State on Thursday for my taxes because I forgot I’m freakin’ dyscalcic* and I only checked the numbers on my tax return twice instead of three times.
That’s why I plunk $50 every pay period into an INGDirect CD. A paltry amount, compared to the hundreds I toss into the Gaping Maw of Student Loan Death each pay period.
Since establishing my Emergency Fund in November, I’ve only tapped my EF twice. First in April to pay the first round of the 2007 Tax Insanity, and then in June for the Great Computer Death of 2008. The tax money this month is coming from cash I am helpfully calling “Yay I got a raise but I’m not even going to think about doing a new budget until after the 2007 Tax Insanity is over!”
It’s a long name. I’m working on it.
“But wait, Mary Sue,” I hear you saying. “Didn’t you just say you have surprises two or three times a month? Where’s that money come from?”
Harhar! You forget! I am a FANGIRL. A redonk amount of my surprises can be listed under the heading of Random Acts of Fandom. And I, being the fiscally responsible fangirl I am, have a Sonic Screwdriver fund I put a smaller amount of money into every pay period specifically for Random Acts of Fandom. If you don’t know why finding out Jonathan Coulton is coming to town three days before he actually comes to town is an emergency expense, well, I despair of ever being able to explain it to you.
Yes, I could theoretically call them the Normal Emergency Fund and the Fangirl OMFGEMERGENCYPONIES!1!1!!eleventy1! fund, but Sonic Screwdriver Fund is just so much more dorky and as a fangirl I am morally obligated to dork it up as much as possible.
Anyway, where was I? Oh, yes, as always, your mileage may vary, you may find Abby’s math much more impressive than my talky, and I’m about 184 credit hours away from my accounting and financial degree so take any of my advice with a grain of salt, a shot of tequila, and a wedge of lime.
*Someone who has trouble with written language is dyslexic. Someone who has trouble with numbers is dyscalcic. The counting on fingers thing? I have to do it for the most basic of mathematic problems. Yes, I work with numbers every day. Yes, I taught math. Because I can overcome all obstacles! Hello! I am Mary Sue!