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I Have a Really Big Emergency Fund to Carry Me Through My Unemployment. – Ashlee

Ashlee

“Dear Steve,

I was laid off in March 2009. I’ve been collecting unemployment and haven’t found a new job yet. I built up a large emergency fund so I’m alright until 2011 if needed (covering my mortgage, bills etc). I have a car loan and I owe around $4000 on it, however; I have the money sitting in that bank account and I’m just too afraid to pay it off completely and that’s why I’ve been keeping it liquid in the bank. I want to know if what I’m doing is correct given the circumstances or if I should just pay it off and be done with it?

Should I pay my car loan off completely or keep it liquid until I find a new job?

Ashlee”

 

Dear Ashlee,

Wow, thank you for reaching out to me before you did anything.

I can certainly understand the motivation to pay off the car, but, here is an alternative view.

Right now your emergency fund is like a giant jug of water that you need to cross a hot and stagnant desert. If I asked you to pour out half of it now so you’d get a more comfortable camel to ride, would you? Would you risk being on a soft camel but halfway across and out of water? I hope not.

I think you are much, much better off preserving each dollar in your emergency fund as you cross the desert of unemployment. Once you get to the other side, if you still want to pay off the car, do it then.

There are some other reasons as well, but I think you get the point. Don’t.

By the way, can I tell you how refreshing it is to get a question from someone with an emergency fund. Good for you.


P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Ashlee

    It took incredibly long to find a new job, but it finally happened!

    I never had to touch my emergency fund, just lived extremely cheap off of my unemployment. It did however make my anxiety much less knowing I had an emergency fund.

    Can’t wait to go to the bank and pay off my car loan to be completely debt free! (That money has been sitting in that credit union the entire time in case I needed it.)

    Realizations from this ordeal:
    Cable is overrated. Downgrade to the cheapest basic of less then $10 a month if needed.
    Clothes cost money, use what you have.
    Shop at the cheep grocery store even if you have to put up with the weirdos.
    Stop ordering food and going out to dinner/reduce it immensely.
    Only buy what you need and realize the difference between need and want.

    No more debt for me! Next time I buy a car, I’m buying used and paying cash, lol!!!

  • Ashlee

    Thank you so much! I’m going to wait till I find a new job to pay my car loan off. I just needed the reassurance that what I was doing was a smart decision.

    P.S. Thank Goodness I decided to make an emergency fund when this economy started to go under…I will never live without one ever again!

    • Ashlee

      It took incredibly long to find a new job, but it finally happened!

      I never had to touch my emergency fund, just lived extremely cheap off of my unemployment. It did however make my anxiety much less knowing I had an emergency fund.

      Can’t wait to go to the bank and pay off my car loan to be completely debt free! (That money has been sitting in that credit union the entire time in case I needed it.)

      Realizations from this ordeal:
      Cable is overrated. Downgrade to the cheapest basic of less then $10 a month if needed.
      Clothes cost money, use what you have.
      Shop at the cheep grocery store even if you have to put up with the weirdos.
      Stop ordering food and going out to dinner/reduce it immensely.
      Only buy what you need and realize the difference between need and want.

      No more debt for me! Next time I buy a car, I’m buying used and paying cash, lol!!!

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