There is always on unexpected expense that can’t be covered by the monthly budget and forces us to put the charge on the credit card.  Sometimes we just roll it into the 2nd mortgage becuase it’s “tax deductile interest” and we can’t afford not to fix it now.

Although that may be true, I would suggest there are better ways to deal with the unexpected.  As almost any financial planner would tell you, GET AN EMERGENCY FUND.  Even if you have as little as $500 put away for a rainy day it might be what keeps you from starting to dig that hole.

The problem that occurs is in the following month our budget is already busted because of last month’s surprise charge.  So how do we fix it?  We don’t pay one of current bills or simply continue to carry a balance on our credit card telling ourselves that “next month we will be able to pay it off and get back on track.”  As we all know, next month comes along and another “emergency” expense comes up and the credit card balance continues to grow and our debt hole gets deeper and deeper.

How deep is your debt hole?
Here are a few questions to ask yourself to see if maybe your debt hole is a little deeper than you thought.

• Can I pay off my credit card balances each month?
• Do I skip some bills to pay others?
• If I lost my job today, would I have enough in liquid assets to survive for more than a month?
• Do my spouse and I constantly argue about money?
• Do I receive phone call from creditors about overdue bills?
• Have I postponed medical or dental appointments because I can’t afford them right now?
• Am I using an increasing amount of my monthly income to pay down debt?