Q. My wife and I are working the Baby Steps and we have our budget in place. Sometimes the budget gets busted because of home improvements and various other things. I think we should take money from our emergency fund when this happens, but she says it should come out of our restaurant and fun money. What do you think?
A. I hate to break this to you, but overspending is not an emergency. So, I’m siding with your wife on this one. If you budget a set amount in one category and you go over that amount, you’ve got to have something you reduce or cut out completely to stay within your budget for the month.
You’d be surprised at what some people call an “emergency.” But here’s the deal: If something happens on a pretty regular basis, it’s a predictable event. That means you need to budget a larger amount for home improvements or whatever the problem area may be.
Overall, on a month-to-month basis, if you find you have $200 budgeted for car repairs and the repair turns out to be $250, I’d rather you cut back on eating out to make up the difference. That’s the way my wife and I did it back in the day. We never touched the emergency fund for anything except big, unexpected, scary stuff.
Q. I have a lot of student loan debt and I can’t afford the payments right now. Should I send them what I can, even if it’s not the minimum payment, or should I not send anything at all?
A. They’re not going to stop bothering you no matter which option you choose. The benefit of sending them $5, even if the minimum payment is $50, is that you’re forcing yourself to start living on a budget and do all you can to honor your commitment. That’s the moral, spiritual and legal thing to do in this situation.
Lots of times when people say they can’t afford something, what they really mean is they don’t want to give up other stuff in order to honor their obligations. If that’s the case, I’m not going to be on your team. You accepted this responsibility, and if that means you don’t eat out or go on vacation until the debt is paid off, then that’s the way it is. But if you’re already living on a beans-and-rice, scorched-earth budget and $5 is all you can squeeze out, then give them $5 and let them know with a clear conscience it’s all you can afford. All you can do is all you can do.
There’s a bright spot in all this though. If you’re scrimping and saving and paying all the money that you have first toward running your household, then secondly toward your creditors, you’ll start finding ways to stretch your dollars even further. Not only will that help you clean up your student loan mess, but it will enable you to have a little bit better life in the process.