Why Emergency Funds are so Critical
Yesterday, we got some great news! Our 3 year old dog does NOT need to have ACL surgery to the tune of $5,000!
This is a huge relief! We’re so happy that our doggo is doing well and feeling better. But we’re equally happy that we don’t have to pay for a costly surgery.
Still, the one thing I a MOST thankful for is that we could have afforded this surgery if he had needed it.
No, it would not have been fun to drop that much money. But having it squirreled away for just these sorts of emergencies is the entire purpose of an emergency fund in the first place.
So how do you get there? When it feels like you’re living paycheck to paycheck how do you save up $1,000 or $10,000 or $20,000 for an emergency fund.
Well, I’ll tell you – it’s not always easy. But it can be done. It just takes a little determination and a lot of will power.
- Put at least half of any windfalls you have into an emergency fund.
Now, some people would say to put it all away, but I’m a realist. Sometimes if you get a big chunk of change unexpectedly you want to have fun with that money. My suggestion would be to take exactly half of it and put it away for a rainy day. Use the rest to get a little crazy.
- Automate Your Savings
I use Chase bank as my main bank and one thing they do that’s nice is give you lots of ways to automate transfers of your money. For instance, I get paid monthly so I big chunk of my monthly pay-check goes straight into a savings account instead of the checking account. It’s out of sight, out of mind. My husband gets paid weekly – so each time a weekly “pay day” deposit gets made, I have set up a rule in Chase to move over a set amount of money into the savings account as well. This helps!
You can also using something like Digit to help squirrel money away. I don’t budget to zero every month, so Digit is perfect for me. It analyzes what’s in my checking account, looks at past bills due to make sure nothing recurring is coming up and then moves money over into a “Rainy Day” fund. I can withdraw that money for emergencies within about 24 hours and it’s back in my checking account if I need it. I love Digit.
- Remember to think about your future self
The thing that’s hard for people to grasp about an emergency fund is that it’s planning for some hypothetical situation to occur at some random date in the future. And most people are all about the present.
So, think of this as an exercise for setting your future self up for success. If your water heater breaks and you need to buy a new one and you have been putting money into that emergency fund – your future self will be able to take a deep breath, not stress out about, get that new water heater and thank your past self for being so diligent. It’s win-win.
Look, you guys. Shit happens. It happens all the time – it’s how you deal with that shit that determines what kind of person you are. The larger your emergency fund, the easier it will be for you to smile in the face of that shit when it does occur.
And you’ll sleep easier knowing that if your dog needs a surgery or you have to replace the tires on BOTH cars in the same month that you can handle it.
How do you handle your emergency funds? Drop me a line in the comments or shoot me and e-mail at firstname.lastname@example.org!