Emergency Fund - do you have one?

[PRICEPLUS]

I had one of 10000 but cards and other items whittled it down some. I need to get it to 10000 minimum and add 100 every month after that!

[sparkysgirl]

i DO, BUT still have credit card debt. it was an inheretance type of thing.

[Aleta]

Yes I do. It's necessary to have a back=up

[meaghanchan]

I do. I had about six months of expenses in there, but had eight months of unemployment.... Now it's up to about three months expenses worth. I'm working right now more heavily on maxing out my 2006 Roth IRA before the deadline, but definitely want to increase the emergency fund to six months of expenses again.

[LateBloomer]

Working on it, I think the idea which suggests that you treat savings like a bill is an excellent way to approach the whole concept. Something else I am curious about is what constitutes a true emergency? Is it the unexpected vehicle breakdown, the co-pay to a Doctor when your child has a concussion or the arrival of unannounced, really good friends from out-of-town and the decision to go out to eat at the last minute? Is it an emotional issue or one of practicality?

[Fizgig]

Originally Posted by LateBloomer

Is it the unexpected vehicle breakdown, the co-pay to a Doctor when your child has a concussion or the arrival of unannounced, really good friends from out-of-town and the decision to go out to eat at the last minute?

Yes, yes, no.

I figure it's something that you have to have, but cannot afford to pay with your every day money. (For me, that's my checking account.)

If I don't really, really need it, it's not an emergency. If the cash isn't in my checking account, I can't spend it.

(By the way, I made my goal today of a 4 month EF. Woot!)

[kristinecfp]

Originally Posted by LateBloomer

Something else I am curious about is what constitutes a true emergency? Is it the unexpected vehicle breakdown, the co-pay to a Doctor when your child has a concussion or the arrival of unannounced, really good friends from out-of-town and the decision to go out to eat at the last minute? Is it an emotional issue or one of practicality?

I think of an emergency as unexpected medical expenses, job loss, loss of spouse, major repairs (unexpected), etc.

But many other people will use their emergency fund as a "slush fund", to fund entertainment expenses (the friends who visit from out of town), vacations, etc. - in addition to funding emergencies.

I'd say it's whatever works best for you, as long as you have funds set aside for when you have a true emergency!

[disneysteve]

Originally Posted by kristinecfp

But many other people will use their emergency fund as a "slush fund", to fund entertainment expenses (the friends who visit from out of town), vacations, etc. - in addition to funding emergencies.

This is basically how I am. I don't have a single account (except for CDs and bonds, of course) that just sits unused waiting for an emergency. I am often moving money in and out of the accounts for one reason or another. It's all cash flow management. Also, moving money around to maximize returns. I'll keep a certain amount in the checking account. When the balance is much over that general comfort level number, I'll transfer the excess to my money market. If a big bill comes along (like the $1,700 in car repairs I just did today), I may pull some money back out of the money market to cover that payment. Same for vacation bills. If a good investment opportunity arises, I may pull some money out to do that. A few months ago, for example, I bought a 1-year CD with 10K from the money market.

As I explained earlier, I don't have one single EF. I have numerous accounts that all together make up our EF. Where the money is at any given moment really doesn't matter. As long as the money is somewhere.

This system works just fine for me, but I'm very good at managing our funds. This wouldn't work for folks who need to know that X amount of dollars is always available in a certain account.

And yes, I have had to use our EF. In 2000, I was unemployed for 3 months. We lived perfectly fine on our cash savings. We could have gone longer if needed. Today, we could easily go 6-12 months without a problem.

[Snoopy2645]

We do have an EF its not much but its thier I used most of my savings to pay down my mortgage

[Aleta]

An emergensy fund is just that , an emergency. When you start your budget, you'll be allocating money for car maintenance, house maintenance, household supplies, etc. When you have used that money up and it is truly an emergency, then you can tap your emergency fund. Your EF fund is not just a fund sitting there waiting for anything to come along. You should have been budgeting money for these expenses all along is which why you got into credit card debt to begin with.

[veronak]

I have an EF but not the 3 to 6 month...I am working on that

[Budgeteer]

I usually advocate that people keep their emergency fund separate from their "occasional unexpected purchases" fund. For instance, we have money saved separately for when our water heater dies, or we have to replace the tires on the car, etc. The real problem with mixing the two is that you can find yourself in an uncomfortable situation if you have a big expense come along, tap your emergency fund/slush fund, and THEN have a life situation hit. If you lose your job right after spending half your funds on a new furnace, you can be stretched real thin in a hurry.

My emergency fund is my "sleep well at night" fund. I'm not touching that unless something is keeping me up.

[doodles44]

I have an emergency fund for four months of expenses and a separate savings account (both at ING) for expenses that come up every six months or every year.

In 2007, I will build up my EF to 7-8 months of expenses. I am making debt payments (all low rates), so I am trying to split the difference by saving and making debt payments. The savings for expected purchases is a newer thing- I'll let you know how that goes.

In the last six months or so, I treated my savings like a bill and I swear, you can do it. Just gradually build it up until you say, "wow, I'm putting away that much each month? I don't even notice it!"

[aurielle]

I do have an EF but its very small at this point. I spent all of 2006 paying off CC debt so nothing was going into savings. 2007 is my year to build up my EF to a 3 month's worth of expenses level and start funding my ROTH again.

[Fizgig]

Originally Posted by doodles44

In the last six months or so, I treated my savings like a bill and I swear, you can do it. Just gradually build it up until you say, "wow, I'm putting away that much each month? I don't even notice it!"

Yup, I experienced the same thing. I get paid weekly and have automatic transfers set up to the EF and to a house account (taxes, insurance, repairs). At the beginning of 2006, I redid my budget and cut way back on the discretionary stuff. All of the leftover was set to transfer, and I thought I would really feel the pinch. Guess what - I couldn't tell the difference, even though I was spending $400 less per month! It blew my mind.

[disneysteve]

Originally Posted by Budgeteer

I usually advocate that people keep their emergency fund separate from their "occasional unexpected purchases" fund... The real problem with mixing the two is that you can find yourself in an uncomfortable situation if you have a big expense come along, tap your emergency fund/slush fund, and THEN have a life situation hit. If you lose your job right after spending half your funds on a new furnace, you can be stretched real thin in a hurry.

I agree, despite what I said earlier about our EF being a fluid account. I do think that there can come a point when you have a sufficient amount of money that this concern is no longer an issue, and we've reached that point, but for many others, especially those just starting out, keeping that EF separate and sacred is very important.

[asmom]

Originally Posted by Aleta

An emergensy fund is just that , an emergency. When you start your budget, you'll be allocating money for car maintenance, house maintenance, household supplies, etc. When you have used that money up and it is truly an emergency, then you can tap your emergency fund. Your EF fund is not just a fund sitting there waiting for anything to come along. You should have been budgeting money for these expenses all along is which why you got into credit card debt to begin with.

Right. That's why I have a separate MM acct where I hold funds for things like car insurance, annual car tag, etc. And I budget for those things all throughout the year. I also add extra money to that account for those minor emergencies like unexpected car or home repairs, etc.

I keep my EF, which is NOT fully funded unfortunately but I am working on it, in a completely different bank. That one is for disasters.

[Ima saver]

I have a fully funded emergency fund. My husband is self employed also, so I have at least one years expenses in my EF.

[The Budget Man]

It's great to have an emergency fund BUT...

For many people these ideas simply don't work. They are struggling to even make the current bills.

Yes an emergency fund is a good idea and yes it is very helpful BUT in the first stages of getting your budget on track it is not the key. In the early days you will be building up some savings and you may have to dip into them in emergencies.

The key is finding a way of budgeting that you will continue with. Don't get caught up trying to run a complex budget, you'll give up and fail.

So here's the key, get started with a simple budget and then add only those things you need like an emergency fund when you are established and happy with the way things are working.

Enjoy Your Money
The Budget Man

www.PersonalityBudgeting.com
Where people go to start sorting out their budgets.

[Elgin526]

A small one. It doesn't make sense to have a large EF while we have debt. We have health insurance along with short/long term disability and life insurance on both of us, so that should get us through any marjor catastrophe, and the small EF fund will cover the "oops the roof is leaking" type problems life tends to throw at you.

Once we pay off the debt, we'll light a fire under the EF fund, I'd like to get 6 months living expences saved.