How much debt are you in?

I was reading this article at newsweek.com when I got thinking. I pose the question to you, "If you suddenly had 30 days to repay all the loans (mortgage, credit cards, hire purchase, etc), would you be able to do it?

Maybe you could, maybe you couldn't. If you had a mortgage, chances are you wouldn't be able to unless you sold your house. Hopefully you can if you just took into account your other debt, if you can't, maybe you should look at trying to reduce the amount of debt you have (although you probably already are). Pay the minimum amounts on the lowest interest debts and pay off the higher interest debts as fast as you can. Be more frugal so you can do this as quickly as you can. Or think about getting a debt consolidation loan where all your debts are put onto 1 loan (with hopefully a lower average interest rate). Just remember to cut the credit cards up and never get any more loans otherwise you'll end up in a position where you'll become bankrupt.

You probably have all seen the news where people in America are living in tents because they've had their houses foreclosed because they couldn't make their payments. I sincerely hope this doesn't happen to anyone since it must be such a horrible position to be in. Let us try and learn from this that times are not always rosy. The banks do not always give loans out because they are certain you can pay it back. You never know when you may lose your job, not because you're not skilled at it, but because the labour market tightens and the firm can't support the amount of staff it has.

You should think about saving to have an emergency cash fund, which is completely liquid and safe. A good amount to aim for is 6 months living expenses. This would include rent/mortgage payments, food, petrol and other essentials you require. Then, if times are ever bad, you have a lifeline for things to get back together. This will give you peace of mind, something alot of people would love to have considering their finances may be keeping them up at night.

What do you think? Is an emergency fund a good/bad idea and do you have one or are you considering having one? How many months living expenses do you think is a reasonable amount to have?