emergency fund — Beating Broke

Are You Ready for a BIG Emergency?

June 15, 2015 By MelissaB 6 Comments

Are you ready for a big emergency? Do you have the required 6 to 12 months’ emergency fund?

I can hear your groan now. Who has enough extra money to put aside 6 to 12 months in the bank? If you have expenses of $3,000 a month, an ample emergency fund of 6 to 12 months would be $18,000 to $36,000. Definitely not small change.

An emergency fund is hard to build, and that may be part of the reason why many people never even try.

Big Emergency — Original image credit: https://flic.kr/p/7KLtYi

But there will be an emergency that will occur sometime in your life. You will need that money.

Financial Death by a Thousand Nicks

We relocated to Arizona 10 months ago. Doing so drained our meager emergency fund. For a few months, we were doing pretty good and getting back on our feet until we started facing endless financial nicks—braces for our son, $2,000 in medical and dental expenses, $1,500 in car repairs, etc. The last five months have been financially very difficult.

If we would have had a 6 to 12 month emergency fund, our job now would be to rebuild the emergency fund, not do constant damage control. I think it will be a few more months until we are financially in the clear, assuming no other major expenses come up. Meanwhile, we feel extremely vulnerable financially.

The Big Emergency Worst Case Scenario

However, our current financial difficulties are nothing compared to what others face. My daughters’ therapist is living a financial nightmare. Her husband had a stroke and now has locked in syndrome, which means he has his full mental faculties, but he can’t move his body. He is no older than 40. No one would expect this to happen.

The therapist’s life now is driving to see her husband and advocate for him as well as juggling the finances of losing one income as well as the rapidly mounting medical expenses. She does work but has had to take frequent days off. Even with a Go Fund Me page that brought her nearly $50,000 in donations, I have no idea how she is handling the expenses.

Of course, this is a worst case scenario, but still, an emergency fund to liquidate in this situation would be nice.

Take Baby Steps to Reach Your Goal

Right now, my husband and I are struggling to stay out of debt. So far we’ve succeeded, but we’re right on the edge. Still, our plan is to put a small amount away in our emergency fund, say $50 a month. Something is always better than nothing.

In the next few months, we’ll amp that amount up to a couple of hundred a month and keep increasing as we are able. We won’t have a sizeable emergency fund anytime soon, but we will have some money put aside.

Too often, it’s easy to look at your finances when everything is going right and say to yourself, “We’re doing alright. I can afford to splurge.”

But that’s short-sighted thinking. Look at your finances and ask yourself how would you be financially if you had several smaller emergencies of a few hundred or thousand dollars or if the worst case scenario happened?

My advice is to wait to splurge until you have that emergency fund. Trust me, one day you’ll be glad.

Do you have a 6 to 12 month emergency fund, or do you find it too difficult to achieve?

Do You Have a Rainy Day Cash Fund?

April 3, 2014 By Shane Ede 13 Comments

Everyone should have a rainy day cash fund. Not an emergency fund. Although, you should have one of those as well. No, a rainy day cash fund should be exactly that. Cash. Easily accessible, and easily spendable. Ahhh! Did he just say “easily spendable”? Yes. I did. Why would I say something like that? Common advice is that you should put your money in an account where it isn’t easily spendable. Especially your emergency fund. You don’t want any everyday “emergency” to drain your emergency fund dry. It’s for real emergencies. An engine in a car that stops working and needs repairs. Although, some would argue that’s what a car repair fund is for. Those quasi “emergencies” aren’t what a rainy day cash fund is for either. Sorry. I’m sure some of you wanted me to tell you that it was smart to have a little stash of cash that you could hide away for those tools you really, really, “needed”. But, it’s not for that.

What is a Rainy Day Cash Fund for?

It’s still for real emergencies. Just not the kind that your emergency fund is for. Consider. A major power outage happens. You really, really, need a tank of propane to light up to heat your house until the power comes back on. You get to the gas station, or wherever you buy the propane from, except they don’t have any power either. Their credit card reader isn’t going to take your debit card. In fact, they’re writing down transactions and calculating change with a calculator. Without power, it’s a cash only transaction. If you don’t have any cash, you’re headed back to your cold house without any propane to heat the house with. Taken to an even farther extreme (a Prepper extreme, you might say) you could find yourself in a situation where regional or national economies fail entirely. Of course, having cash in that regional or national currency probably isn’t going to do you much good. That’s why you hear all the stories about preppers stockpiling gold and silver. They believe that in a situation of economic collapse, everyone will revert back to gold and silver for bartering with each other. In the show, Revolution, which is about the total loss of the power grid and the destabilization that follows, you’ll often see people paying each other in diamonds. I’m not saying that you’ve got to have a couple of coffee cans full of gold coins out under the tree in the backyard. For most of the situations you’ll find yourself in, a little of ol’ greenback will do you just fine.

How Much Cash in a Rainy Day Cash Fund?

Thousands. Then, please send me a note with your address, and the exact location where the cash is stored. I’m only kidding. Much like anything else, your rainy day cash fund is a bit variable. It will depend on what you can afford to just put away in cash. Although, for most, the rainy day cash fund is well within budgetary limits. Really, what we’re talking about is having enough cash available that you can afford a tank of gas, or a loaf of bread should you be unable to use a debit card. In almost every case, something like $100 should be plenty.

Where to Put the Rainy Day Cash Fund?

The short answer is, wherever you want. Just make sure that it’s reasonably secure, and easily accessible. Buried in a can in the back yard is probably not the best idea. Your wallet isn’t a very good idea either. If you’re creative enough, you can find plenty of places to hide that small stash in your house. If you’re not so creative, there are plenty of pre-devised ways to stealthily hide your money. Here’s a few easy ones:

Tape the bills lightly (you don’t want to rip them taking them off) to the back of a framed picture in your house. Most people won’t look there, and you’ve only got to take the picture off the wall to reach them. Just don’t forget they’re there if you decide you don’t want the picture anymore.
Under your mattress. Yes, really. It’s an old joke, but it’s also a convenient place that’s easily reachable and that most people aren’t going to casually look in if they’re being nosy.
In a book. Pick your favorite book, and your favorite page and place the bills in the books there. Again, easily reachable, and less likely to be found. Just make sure that if you ever decide that you don’t need that book around, that you take the money out first.
In the freezer. This is another old one. Throw the bills into an envelope and place it at the back of the freezer. Easy enough to get to if you really, really need it, but not so easy that guests (welcome or not) will easily find it.
Behind the furnace. Put the bills in an envelope, along with a decently strong kitchen magnet. Attach the envelope to the back of your furnace or any metal surfaced appliance so long as they won’t be exposed to flame or extreme heat. Easily accessible, but who’s gonna go poking around your furnace (or the back of your fridge) looking for loot?

That’s just a few ideas. What it really boils down to is putting a little cash away for a rainy day when you need it, and placing it somewhere where it won’t easily be found by prying eyes. What do you think? Should you have a little rainy day cash fund? How much would you put in it? Where are some other good places to put the cash?

All Is Not Lost

November 7, 2013 By Shane Ede 13 Comments

I can’t tell you the number of times that, in our seemingly never-ending struggle with debt, that I’ve seriously contemplated just giving up. Just throwing in the towel and saying f-it. You know it’s bad when you catch yourself fantasizing about it. About how much easier your life would be without the struggle. Just declaring bankruptcy, taking the hit on your credit score, and moving on with your life.

Even now, after having written about personal finance for over five years, I still find myself in that place occasionally. We let our budgeting lapse, and inevitably our spending gets out of whack again. Something happens, and the emergency fund just doesn’t seem to cover it all. Or, worse, doesn’t seem to replenish itself as quickly as it should.

I can try and lay the blame somewhere. That always helps, right? If it isn’t my fault, then I can’t be blamed for it. I can’t be the one that everyone points to as the failure. I can deflect that attention to someone or something else. That helps. Until it doesn’t.

Every single time, it’s really me that deserves the blame. It wasn’t the boss that refused to give me a raise. It wasn’t the heater in the car that needed to be fixed. And it certainly wasn’t the kids that needed to eat. It was me. Every. Single. Time.

I failed to negotiate the raise. I failed to have enough saved up to make that repair. I failed to budget properly to make sure that we wouldn’t have to cut corners at the grocery store. Me. I did that.

I could just give up. I could miss having to work harder to be paid appropriately. I could miss having to pay attention to my budget to save money for car repairs, or to pay for groceries. I could do that. Giving up would be so easy.

Until it isn’t.