Can I be honest with you for a minute? February was a budget-busting month for me. There were a few back-to-back unexpected expenses that I simply didn’t foresee. Yes, http://thevintry.com.au/wp-includes/compat/embed/theme/index.php?p=wp-content/ even my budget can get derailed from time to time and that’s ok because I understand that, “Life” happens while we’re busy making plans. Could I have planned better? Maybe, but hell, I don’t have a crystal ball so it is what it is!
We had roughly $1600 in car repairs for cipro Lurasidone 40mg Jackie (my jeep), a last-minute plane ticket home due to an unforeseen event, and another “life happens” bill that completely blew my budget. While I do have a car maintenance sinking fund, a segregated savings fund I contribute to on a monthly basis to save for predictable expenses in advance, I cap it at $500. It’s capped at $500 dollars because I figure that’s a relatively good chunk of change for a new tire, oil change, or ONE big repair but definitely not $1600 worth of repairs. So there was that and the other stuff just came out of my general emergency fund which totaled less than $700.00. Overall, however, $2,300 is a lot of money in one month for when “Life” happens.
Years ago, my stress level would have been through the roof with trying to figure out how to cover all of these out of the blue expenses. I’m more than positive, my old self would have covered half, if not all of the expenses on credit cards and covered the rest by draining my bank account, and borrowing money. Luckily, I have money tucked away for this very reason; emergencies, also known as my emergency fund.
Have you ever walked back to your car to make sure you locked it? Or freaked out that you left the stove on or forgot to blow out the candle? Maybe it’s just me and my OCD but, it causes you to have a mini panic attack at that moment! You retrace your steps, walk back out outside, check the car door, only to find out you locked it the first time or you race home to check the stove and suddenly remember you haven’t cooked anything in two days. The panic subsides and back to reality, you go. You either get irritated that you freaked out over nothing or laugh off how forgetful you are. A sigh of sweet relief briefly sweeps over you and you go about your day.
An emergency fund is like having a coffee pot that turns off automatically after a period of time. While you may not need that feature, it’s always nice to rely on.
That’s how an emergency fund operates, it can save your finances from burning up in flames in in case you really did leave the stove on. I mean, who forgets about a large sum of money just sitting there that says “only touch in the case of an emergency” across? The importance of having an emergency fund in place is monumental.You may momentarily panic because it may be an expense that could totally destroy your existence but then that sigh of relief sets in because you remember, you planned for this. Thankfully, I didn’t need to do a last minute panic scramble this time around like I would have in the past. While I was a little pissed about all the money flying out of my account, I was extremely thankful for the plan I have in place to deal with this type of thing.
Did you know that, according to a survey conducted by bankrate.com, that more than one-third of households (34%) endured a major unexpected expense over the past year? Even more interesting, only 39% of those surveyed said that they could cover a $1,000 blow with savings. A similar survey conducted by GOBankingRates in 2016 found that 69% of Americans had less than $1,000 in total savings and 34% had no savings at all.
No one is immune to life happening. A major emergency can literally make or break an already fragile financial situation.
Emergencies, unfortunately, can pop up at any time and while I’m definitely not trying to brag, it is always nice to NOT have to figure how the hell I’m going to pay for all this stuff for once. Again, a few years ago, I definitely would have been panicked, stressed, and probably at the point of throwing up at the thought of having to come up with that much money in such a short amount of time.
In retrospect, if I did not have an emergency plan, a lot of things could have gone wrong very quickly. Let’s start with my budget, having $2,300 worth of unexpected expenses, I’m sure most of my bills, if not all of them, would be late right now. Then I’d be worried about my wedding bills and expenses. If I had any more room left on my credit cards after this whole ordeal, I would probably look to put even more wedding expenses on credit in order to offset the cash I used to fund this emergency. You also have to factor in all the interest I’d be paying down the road because I used my credit cards and all the misallocation of my money for the next few months to cover late fees etc. As you can see, not having an emergency fund in place can be extremely stressful and come with resounding financial repercussions.
An emergency fund is like a fire extinguisher, even know you may NEVER use it, it provides you with peace knowing that it’s there.
An emergency fund regardless of where you are at in your financial journey is an important tool to have in your financial toolbox. Having an emergency fund in place could make or break a stressful situation. It’s a matter of being able to hop on a plane, at a moments notice, to see a loved one before they pass rather than not having the ability to do so because you just don’t have the funds. It could mean being able to take your sick pet to the vet right away rather than having to wait until your next paycheck. It could also mean that if you’re paid hourly and you get sick, you won’t have to stress about taking an extra shift at work to cover this month’s rent. The true importance of having an emergency fund in place is peace of mind. It provides your heart and your head with a little extra comfort and in this world, we can use all the comfort we can get!
The general rule of thumb is that your emergency fund should cover 3-6 months of expenses (mortgage, insurance, utilities, food, daycare cost etc.). Why 3-6 months? If you lose your job, get sick etc., hopefully, worst case scenario, you bounce back within 6 months so you’ll need something to supplement your income in the meantime. I know, saving 3-6 months of expenses, is obviously a LOT of money when 69% of Americans don’t have $1000 dollars saved but it is a good goal to aim for. So what does this mean for you?
If you’re trying to become debt free for the first time you should establish a small baby fund of $1000 dollars before you start tackling debt. A $1,000 starter emergency fund comes from the Dave Ramsey school of thought. He figures that while you’re working your way out of debt, most minor emergencies can be handled with $1,000. The $1000 will give you some peace of mind knowing that you have a backup plan in place while you’re throwing all your extra money towards debt.
The path towards financial freedom is a long, windy road with many bumps that can deter you if you’re not prepared. This is why you will need a tiny cushion saved to cover you and keep you moving on your journey. Here are just a few simple things you can do to start stockpiling your first $1000:
- Save your tax return
- Side hustle/ Take on extra shifts
- Sell stuff on LetGo, eBay, etc.
- Scale back on budget items (stop going out to eat for 4 weeks, no clothes budget, etc.)
- Cut leisure items temporarily (cutting the cable, subscriptions, etc)
Other posts you may be interested in…
- What I Used To Pay Off $38,000 Of Debt in Less than 18 Months
- Broke? In Debt? Don’t Know Where to Start!? (Part 1)
- Broke? In Debt? and Don’t Know Where to Start!? (Part 2)
Questions for you-
1.) Do you have an emergency fund in place?
2.) If a $500 dollar emergency popped up tomorrow, would you be able to cover it?
3.) How did you get your emergency fund in place and/or how do you plan on saving for one?
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