Not Just Another Emergency Fund Post

Let me start this out by saying, I hate emergency funds. Not because they aren’t useful, but because they are boring as hell. They are the savings equivalent of paying for insurance. And no one wants to save for insurance.

Because I hate emergency funds (and because I’m in debt), I’ve never kept much cash around.

Why would I? I’m in a two income household, I’m a renter, I have car insurance AND a crazy big warranty, I don’t have pets or kids, and I don’t have any existing medical problems. Well, guess what? We all have our thing that could put us in danger of shelling out four figures or more for an emergency. My thing is my husband’s family living overseas.

In January, my mother-in-law died unexpectedly, causing us to buy overseas plane tickets and take three weeks off of work. The problem was, I had basically nothing savings-wise. Know what that means? The plane tickets and all travel expenses went on a credit card (as did some of our life expenses due to the lack of work). Our expenses were crazy high, because grief just isn’t frugal.

While I don’t regret ANY of the spending (because people, THEN money), it has opened my eyes to the importance of an adequate emergency fund.

You may have just about everything going for you, but emergencies don’t give a shit about your plans.

Prepare yourself now, no matter how unlikely you believe it is for an emergency to occur.

Guess what, guys? Dealing with the loss of a loved one is not the time to worry about money. While you can’t insure yourself against heartache and loss, you can have the money in place so you can grieve without finances weighing down on you.

Lessons learned:

1) When shit hits the fan, you best have an umbrella.

2) Don’t ever let something as trivial as money keep you from your loved ones. EVER. You wouldn’t trade your loved ones for cash, don’t prioritize it over them.

3) While I hate putting money in an emergency fund, I need to do so. Paying debt is more attractive, but what’s the point if I’m going to have to finance emergencies anyways?

We all have that thing that could ruin us financially without an emergency fund. What’s yours? Do you have enough in your emergency fund to accommodate it?

Stop being jealous, start getting results: the $10,000 Emergency Fund

One of my favorite personal finance bloggers and BFFs offline is Mikhaila from A Fistful O’ Dollars. I really adore Mikhaila because she is smart, into fashion and frequently responds to my text messages with hilarious GIFs. But one of the things I admire most about Mikhaila is that she’s saved up a…

$10,000 Emergency Fund.

So awesome! Needless to say, I’m a tad jealous of that awesome financial security. I wish I had a $10,000 emergency fund! That about would be about 6 months of essential living expenses for me, and just seeing such a big beautiful round number of dollars would give me a daily dose of happiness and security. Alas, how was I ever going to accumulate that much in my Emergency Fund? I struggle to keep it at $3,000! I guess I’ll just be jealous of Mikhaila forever.

….or I could just figure out a plan and start working on a $10,000 Emergency Fund myself.

Because it’s not as hard as it looks at first glance. With some rough calculations I figured I could get my EF up to $5,000 by the end of this year, which means I’d only have another $5,000 to go. If I set my timeline to have a $10,000 Emergency Fund by 29 and contribute $250/mo, I’ll be right one schedule — I mean, assuming no emergencies make me withdraw some or all of the funds.

See? It’s not even challenging, it’s just a matter of setting up automatic transfers from my chequing to my savings account. The downside is I’ll have to wait 1.5 years to see the final result, but for a five-figure sum that’s not too bad. Like most financial goals, the number itself is intimidating the but the path to get there is pretty straightforward. I think I’m lucky that after so many years of blogging about money, an 18 month financial commitment to put $250/mo away is relatively easy. The hardest part is always building the habit in the first place, but once you’re used to giving up part of your income for paying down debt or saving for retirement, it’s just something you know how to do so you feel confident taking on something else.

This would provide me with 6 months of essential living expenses and probably solidify my eternal friendship with Mikhaila because few things say “I am a PF master” the way a $10,000 EF does.

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Have you decided to take on a big financial goal? What’s your plan, man?

I’m so glad I have an Emergency Fund!

I’ve always been a huge advocate of setting aside money “just in case”. I think an emergency fund is essential to financial health, in the long-term but especially in the short-term. I’ve worked hard to build mine up to a healthy $2,500 this year, and up until this point have only dipped into it once for $65 dentist appointment.

If you can believe it, I actually thought I would get away with having a substantial balance in my TFSA without incident forevermore, but alas, scheduling conflicts have forced me to dip into savings just to tide me over until payday.

If you remember, I moved into my  new apartment last Saturday. Because I moved before the end of the month, I erroneously assumed my damage deposit + first month’s rent would be due on August 1st. Well, this isn’t the case. My resident manager has asked for my damage deposit this week (I paid it yesterday) and first month’s rent by this Saturday. In cash.

Ever heard that a credit card is NOT an emergency fund? This is a great example why.

To tide me over, I withdrew $1,000 from my emergency fund this week to cover the cash expense of my damage deposit + first month’s rent. Imagine I didn’t have that money immediately accessible in a savings account — a $1,000 cash advance on a credit card is not a pretty sight. I’m pretty sure the interest on cash advances on my credit card is something stupid like 20% or 25%, whereas the cost of withdrawing it from savings is 0%.

THANK YOU, Emergency Fund!

I can’t tell you how nice it was to tell my new resident manager, “no problem” when he asked for $1,200 cash this week. Having the money set aside prevented what would have otherwise been a serious headache, which may or may not have included awkward requests at work for cash advances before payday. Thankfully no has to know I was totally broke this week… except, of course, all of you who I am now telling this story to on a very public blog.

My plan is to replenish the missing $1,000 from my EF this Friday when I get paid, and the rest on August 1 when my old roommate returns my damage deposit for my last apartment. Crisis averted, Bridget’s butt = saved.

Build your emergency fund, kids. You will need it.

I dipped into my Emergency Fund!

Yikes! I have been building the EF up for nearly a year and it’s gone totally untouched up until this point. The last time I made a withdrawal was September 2010 to pay the damage deposit on the apartment I currently live in. That time it was $600 — this time, thankfully, it was only $64.

Were you worried I had wiped it out entirely? No need for that yet; knock on wood!

I had made a dentist appointment when I was in France (they called me when I was on the train between Nice & Paris!) for when I got home, then totally forgot about it. When it came up last week, I hadn’t budgeted at all but went anyway because hey, it’s the dentist. You need to keep up with that stuff. After a cleaning, fluoride treatment, X-rays and check-up, my bill came to a whopping $317! Thankfully, I’m still covered by the University’s graduate student health plan (until August!) so I only had to pay $64.

Lesson: the right health plan is worth it. Always opt in.

I love the student health plan. It’s probably saved me $2000+ since it was implemented two or three years ago. It makes my birth control cost $5 instead of $40. It makes my glasses and contact lenses cost $50 instead of $200. And it makes my dental bills cost $64 instead of $317. Seriously, it is good stuff.

Anyway, even though the amount was small, I’m still glad I had the money available since I’m on a credit card diet post-France. I’m a huge advocate of an Emergency Fund — even more for the times I’ve had to use it, and that hasn’t been often. It’s currently at $2500 (ok, $2436 until next payday!) and while I definitely want more in there, I feel like that’s a really solid start. It’s definitely enough for an unexpected medical expense or a plane ticket if there was a family emergency, and it’s more than enough for small things that I fall short on like dental bills or groceries. Because I just got back from a month-long trip and am only working part-time, I’m scared of coming up short on rent or food money, but knowing I have cash set aside “just in case” takes a lot of the pressure off.

It also makes me feel really guilty for buying a sweater and a tank top for $63 the same week. Whoops!

Snowball your savings

Dave Ramsey is credited with the “debt snowball” — a popular method of paying off debt, that works by focusing on eliminating your smallest debt first, while just making minimum payments on all the others. When the first debt is paid off, you then use the money you were directing it to tackle the next, and so on until you’re completely debt free. This way, each payment grows like a “snowball” as it attacks each subsequent debt.

Since I get so very pissed off at my accounts growing at a snail’s pace, I was wondering if I could reasonably apply this method to my savings accounts?

Instead of $150 here and $250 there, etc. why not pay each one a “minimum payment”, then throw the rest at one goal? I think I could put $100 minimum at everything, while focusing on meeting just one goal. The only thing I would have to contribute more than $100 to regularly is my vacation fund, since that will also be regularly depleted at a rate much more rapid than $100/mo!

I guess I just really don’t want to wait for anything to happen, I need some accomplishments now! Snowballing my savings would let me meet my goals in rapid succession, rather than all towards the end of the year like they’re currently paced out for.

Having lots of goals at one time is daunting to me. Thinking about my vacation fund, emergency fund, RRSP, house fund, then wanting to save for investing, a family and someday a car is just overwhelming. That’s a really long list! I’m comfortable with my income, but when I start entertaining all these wants it can feel small. If I could knock a few of those items off the to-do list, it might be more manageable.

The most infuriating thing of all, however, is the reality that I could have everything I wanted if I just saved less money and used credit to fill in the gaps. Why have an emergency fund? There’s an empty line of credit here that will be really accommodating in your time of need. Want to go on vacation? Well, this Visa card is free & clear. Oh, you need a car in the future? The vehicle of your dreams can be yours for only $399 per month! Also, why try to save 20% for a down-payment on a home when the bank will let you get away with less than half that? Maybe 5% is all you need! Retirement? You have 40 years to figure that out! Besides, you might win the lottery any day now, and then all your efforts will be for naught.

Living within my means means living in reality, not the credit card fantasyland the rest of my friends get to frolick about in. Am I a bad PF blogger because sometimes I want to join them? It just looks so much easier. Being financially responsible sometimes isn’t very fun.

So I’m going to try to snowball my savings for the next few months and see how it feels. I will ONLY put $100 into my House Fund, and $185 into my RRSP (cutting this down to $100 is too painful so I’m going to keep it as is), then my main focus will be just getting that emergency fund to $3000. Once that’s done, I will move on to my next goal. If I don’t like the system, then hey, at least I have a fully funded emergency fund and I can return to divvying up deposits equally between my other accounts. The important thing is I will probably be able to meet my first goal by the end of March (!!!) so no more waiting around for things to happen! I will keep you posted..