Emergency Funds: Because Life Happens

It can happen to anyone at anytime. Everything is going swimmingly, when suddenly your car breaks down. Or your boiler stops functioning mid-January. Or you have an unexpected medical problem. Not only do you have the problem to fix, now you have another problem too-

Money.

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Dave Ramsey (who I highly recommend if you’re facing financial stress) recommends building a $1000 emergency fund that you strictly are not allowed to touch. Ever. Unless in case of emergency! He then recommends to continue building an emergency fund of 3-6 months worth of your income/expenses in case one of you loses a job or faces catastrophic circumstances.

We took this emergency fund advice seriously shortly after we got married, and I am SO glad we did. It has the amazing ability to help keep you ahead instead of behind. Although we keep dipping into it for various needs, we are usually able to gradually replenish it by the time the next mishap comes around. And it’s funny- there always IS a next time!

When have we needed an emergency fund? Just in the past six months, we have had several occasions. First, our water stopped working and we found out we had to replace our well pump. About $1900 later, we were functioning again. Fast forward a couple of months: a swarm of European hornets infested the wall in our kid’s room. It cost $150 to get them out from a bee removal company (which was actually a steal), plus the money to repair the hole cut into the wall above our daughter’s crib. Next, our car inspection cost a few hundred more than we expected. Recently, heavy rains revealed a leak in our roof. This week, our deep freezer went. Fun, fun.

Big or small, emergencies DO happen and can knock you into a major financial hole if you’re not prepared. Our emergency fund is not nearly as large as many financial experts suggest (we’re just not there yet!). But if we hadn’t had any fund, each of these unpleasant surprises would have put us in deep doo-doo with the bank and our bill payments. While financial upheaval can still be a shocker, the cushion of back-up cash (even a few hundred!) can make the unexpected much easier to handle.

How can you build up your emergency fund? If you have extra money, great. Prioritize your fund and put away a little at a time ($10 a month? $50? $100?) until you reach your goal. If you don’t immediately have extra money to put into savings, look for other expenses that you can temporarily eliminate and put that money towards your fund instead. Cable TV, Netflix, the newspaper, a gym membership, your morning coffee run or lunches bought on the go- all can be dropped to give you some substantial cash to keep on hand!

While it’s tempting (especially during the holidays) to make extra purchases out of stress, lack of time, or for gifts or convenience’s sake, it’s much better to take some of that extra and put it towards an emergency fund. It might save you big time one day in the future!

Here are more ideas to help you build a stash for the next rainy day.

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