Saving Wasn’t Easy
I remember a time in my history when saving wasn’t easy. In fact, it was almost impossible. I wanted an emergency fund, but I literally didn’t have the money to even buy one cup of coffee a month, let alone go to the movie or out to dinner. But that emergency fund was so important to me because I had also, at one point in my life, taken out a title loan. Without understanding exactly what a title loan was or how much money I would be wasting, I willingly took my car, had it inspected at the title loan office, signed the paperwork, and I had $2500 cash in hand to pay for a deposit on an apartment and a few sticks of furniture.
What is a Title Loan?
It is a short-term loan using your car as collateral. The loan is usually due within 30 days, has a very high interest rate, and if you don’t pay it back, you lose your car. This sounds harsh, but you have to read the contract and paperwork before you sign.
I’m going to lose my car!
It was a mistake on my part. I was in trouble. I couldn’t pay it off in time and I was going to lose my car. I finally called my brother to plead for help. He ended up loaning me the money to pay the title loan off. But I didn’t just have to pay the $2500. I ended up paying $2800. There was $300 extra in interest and fees, just so I could move into that apartment! What a waste! Instead of taking out the title loan, I could have waited a few months to move. I could have stayed with a friend while saving for that apartment deposit. Or I could have gotten a temporary second job (which I did later). After taking out that title loan and wasting $300 on literally nothing, I vowed never again to be so enticed by a purchase. I would wait to save for anything I wanted.
Saving for an Emergency Fund
But how could I save for an emergency fund? It wasn’t a “thing” I wanted, but the security of having money in the bank for emergencies. Like I said, I didn’t have money. I was working a slightly higher than minimum wage job and going to school. I ended up getting a roommate. My apartment was a one bedroom but there was a little space under the stairs that the previous renters had used as a storage closet. I converted it into a bedroom for me. It was just large enough for a single bed and two milkcrates for my clothes. That freed up the large master bedroom for a paying roommate. The extra cash helped me put a few more items in my fridge, let me go to the movies once a month, and put a few dollars in savings. But I wanted a large savings account that could carry me through 6 months of unemployment if I needed it to. I needed more money to accomplish this goal.
My Extra Job
I ended up squeezing in a part time job between classes. I rose every day at 4:00 am so I could do all the kitchen prep work at a restaurant. I chopped all the vegetables needed for the day, got the sauces ready, cooked the meats, re-cleaned the tables, disinfected all surfaces until 9 am when I had to leave for class. After class and on weekends I would squeeze in 30 more work hours at my other job.
Reaching My Goal
While it’s true I didn’t have much fun during that time, I do remember the satisfaction of watching my savings account grow. With the extra cash I was receiving from my renter and my part time job, I was able to put together a complete emergency fund of 7 months of expenses within 2 years. After that I left the part time job, graduated and started looking for a better paying full time job. It all worked out. I met my emergency fund goal, with a lot of hard work. It was brutal to work that many hours and go to school. But to this day, my emergency fund is full and I’ve added on another 17 months to it. This gives me a cushion of 24 months of expenses. I never have to take out pay day loans or title loans again. I’ve made it a personal rule to never rob my emergency fund for purchases. If I want a new couch, I save money for it and then buy it. If my car breaks down, that is considered an emergency because I need it to get to work. I’ll use my emergency fund for that but I always replenish the funds before any other purchases are made.
Saving to Reduce Stress
Having my emergency fund has reduced my stress tremendously. The journey to get my fund going was long and hard. But the peace of mind and satisfaction of accomplishing that goal was well worth it.
Note About Title Loans in Arizona
Arizona puts caps on the amount of interest that can be charged for title loans. However, this interest rate does not include all the fees associated with the title loan. Plus, title loan interest and fees are still much higher than you would pay for a loan at a credit union.
ASCU considers title and pay day loans not in the best interest of members because of their high interest rates and fees. Therefore we do not provide title loans. Talk to an ASCU loan specialist to discuss loan options through ASCU before making any decisions.