Adventures in Debt

If you read any book on personal finance, there’s always a section about how you should have an emergency savings fund. Most people have debt instead of savings, so the notion of an emergency fund is a foreign one to them, myself included. You can read up on how to best create an emergency fund for yourself in many places both online and in hard copy, but here’s a quick list for you:

• Emergency Funds on About.com
• David Bach’s Finish Rich.com
• The Emergency Fund on It’s Your Money

Having an emergency fund was not a priority for me until about 6 years ago, when I was unemployed for a good portion of the year. I developed my frugal-ness during this period, but it reminded me that this would have been a good time to have an emergency fund. So I started saving, even though I had debt, I saved some money for a rainy day. I admit I did dip into it at one point to pay off a car maintenance expense, but since it was an emergency (I had chipped my windshield), I felt justified.  And now I just checked my balance, and I’ve got over $1000 in it! I was quite pleased to see that. Sure, it’s not the amount I would feel comfortable with, but I’m on my way now. I am targeting having approximately $5000 in it, as that would cover expenses for about 3-4 months.

Once I hit the magic number, I’m going to start taking half my deposit and redirect it towards my fun savings funds, which consist of two vacation funds, and a new computer fund. I’ve also started up an “I want a new cell phone fund”, using only my toonies for that (toonies are the $2 coin we have here in Canada, for those of you not familiar with them.) My brother in law uses this method for his video games, and he finds it works quite well.

I’ll end this post with the title, to get you thinking and talking about your savings: how much is in YOUR emergency fund? Are you saving up enough for 3, 6 or 12 months?

Earlier this summer, I wrote about how I was reorganized out of a job after my company was purchased. Of course I wasn’t that upset as I’d already been searching for a new job, so this was a good motivator for me to get moving on that search. What made things easier was the severance package I received:

• 8-weeks of my regular pay,
• a “don’t sue us” bonus of another 4 weeks pay,
• plus a pro-rated portion of my semi-annual bonus.

I was told that my bonus payment would actually be a lump sum payment, which was a tad annoying, since that would mean I would lose quite a bit of money in taxes. A bonus payment is considered supplementary income by the federal government, which meant I would lose almost 40% of the money. I was pleasantly surprised to see last Friday that my former company has actually decided to split the money into an even number of payments, which means I only lose the amount of taxes on that small amount, as opposed to a larger portion of the larger amount. This lets me pay off more of my debt (not that I’ve been doing much of that, witness my previous post on how much my debt increased.)

My savings accounts are still doing well though, as I put them on automatic a few months ago. What’s even better is that one of my banks is increasing it’s interest rate, which will earn me more money in the long run.

And in two weeks I get my first pay cheque from my new job.

Isn’t it wonderful when things come together? If you’re looking for more information on help with your finances, such as how to get rid of bad credit loans, go check out www.600.net.

Interesting. Picking your stock portfolio based on Jim Cramer’s advice isn’t the best thing for your portfolio. According to the article on Yahoo.com, Mr. Cramer’s picks haven’t beaten the market over the last two years. Now while his show Mad Money states that you should do your own research before purchasing any stocks, I’m sure a lot of people buy a stock simply because Jim Cramer talked about it. The stock market is a volatile place to be placing your money, so it’s always wise to do research before buying. My brother in law spends several days to a week researching a stock before buying it. I don’t like to spend that much time researching a stock, which is why I don’t invest in equities. I do invest in mutual funds, and I do research those before investing, but thankfully the tools available for that are a little easier to manage than the stock market research.

So do you invest in the stock market? If so, do you research, and how much?