After college, I was waiting tables by night, living the good life of a 20-something in the city by day. Cool roommate, cute dog and a little spending money to boot. Then one day, my dog ran into the street and was hit by a car. She needed a $2,000 surgery ASAP and I had zero savings. I did what most of us would do — I whipped that credit card out so fast I gave myself whiplash. (P.S. The surgery ended up costing a lot more than 2K).
Fast-forward a few weeks. The pup was healing, I was doing a good job forgetting my newfound debt and the car I’d had since high school broke down. The repairs were $1,700. Dude, thank goodness for credit, I thought. Years later, I’m still paying for those two emergencies. Hey — no one knows when crisis will strike and credit cards are great for a little added security. But it’s easy for one big charge to snowball into years of debt. Here’s how to avoid having it happen to you:
1. Start saving now with the goal of stashing away $1,500 – $2,000. One key to staying out of debt is creating a cushion for those “what-ifs.” Just save whatever you can each month until you hit your goal. You can find more great info. on saving here.
2. Use a low interest card if you do have an emergency your savings won’t cover. If you didn’t shop around for a good rate before, it’s not too late to do it now. Most card companies will give you a lower rate if you just call and ask.
3. Make a plan for paying off debts. If you have an emergency and you’ve got to charge it, plan out your payments from the get go. (Remember that making minimum payments can mean paying tons of interest and being in debt for years.) You can calculate how long it will take you to pay off your balance here.
Bottom line: financial trouble’s bound to hit every once in a while. Instead of considering a credit card your emergency fund, start stashing away a little cash. It’s just another way to keep your debt from getting out of control. For more on using credit wisely, go to What’sMyScore.org.
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well as i can see you had made a big mistake as everyone else…why you heal your puppy? )))) just kidding))) what i want to say that too many people live day by day and underestimate the power of recent saving! you gave us an example, i personally have a saving account but it is empty(.. at least for now. cheers!