You need an emergency fund.
In order to minimize your stress during an emergency, and minimize your risk of going into debt during said emergency, you need an emergency fund.
Now, let’s not play games. If you’re paycheck to paycheck like us, creating such a fund can be a real hardship. You want to put $10 a week in savings, but you need that $10 to buy gas to get yourself to work. We feel you. We live that every single week.
But consider this. It’s Tuesday morning. You’ve got .27 cents in your savings and four bucks in checking, and your car breaks down. It needs a three hundred dollar part, you don’t get paid till Friday, and your paycheck will only be $325, which leaves you $25 for gas, groceries, and anything else you might need for the next two weeks. Plus, with your car out of commission until Friday you’re going to miss three days of work and three days of pay. If you have a particularly shitty job, you might actually get fired.
You’re screwed.
If, however, that .27 in savings was $1000, you’d just make a transfer on your phone, hand your debit card to the mechanic, and be back on the road in a few hours. You might miss one day of work, not three, but it’s ok because you’ve still got $700 in savings to cover the missed hours.
So it’s still a bad day, but you’re not screwed.
So how do you save that kind of money? If you’re broke like us, bit by bit. Cut your expenses as much as you can by creating a strict budget and assessing what things you need vs. what things you want but aren’t necessities. It might seem impossible. We know something comes up every week. You set aside five bucks, but then on Thursday you run out of deodorant. You set aside ten, but then you get sick and have to spend it on Sudafed and crackers.
We know, dudes. We know.
Do what you can. Automate your savings using direct drafts or even deposit a small % of your pay into another account. An online savings account is ideal, they often have high interest yields but are still easily accessible. Or, hide a five under your mattress every week. Put your change in a piggy bank. Do something, is what we’re saying. We know it’s hard, but giving up isn’t an option. If there’s an emergency then tap into it, and replace it as soon as possible.
What have we done to fund our emergency savings? No streaming media, no soda, no fast food. That ten bucks we would have spent on Netflix goes into savings instead. It’s a slow process, but it’s better than nothing. And hey, we’ll be honest. We got sick a couple weeks ago and had to spend money on medicine and miss work. Our account currently has $11.67 in it. That’s our emergency fund. Sigh.
We know how Sisyphus felt.
Now that you’ve got your emergency fund started, it’s important to decide what constitutes an emergency, so let’s consider a few scenarios.
Broken car: if there is no public transportation in your area, this is an emergency. You need to get to work. Tap into your emergency fund.
Broken house: If your toilet is broken, or your roof, or a window (and it’s winter and can’t wait) those are emergencies. If you aren’t able to fix those yourself, tap into your emergency fund.
Broken appliance: If your fridge or hot water heater quit, those are emergencies. You need food and you need to shower. Hit your emergency fund. (PS, if it’s your dryer then don’t, because air dries things for free.)
Lost your job: If you find yourself suddenly unemployed, you can use your emergency fund to keep your lights on and food on the table. You need to find another job immediately, though. That’s another post.
Illness or Injury: Got a cut that needs stitches? Running a fever over 102? You need to hit the urgent care clinic. If you haven’t got insurance, tap into your emergency fund.
Sick pet: If your dog or cat or hamster needs to go to the vet, tap into your emergency fund. We’ll probably have some readers who disagree, but if you have a pet then you’ve made a commitment to care for that animal in sickness and in health. Denying medical care is animal cruelty. If you can’t afford the vet, you can’t afford the pet.
Broken glasses: If, like us, you are required to wear corrective lenses in order to drive a car, then yes, this is an emergency. Replace them, and replace the funds in your emergency account as soon as you are able.
Now, what are not emergencies? Let’s look at a few non-emergencies:
A new movie came out and you don’t get paid until Friday: Well, wait until Friday, you whiner.
You want some pizza: No.
You need a new outfit for a party: No.
Your phone broke: Get a new one on Friday. You can get a pre-paid one for fiddy bucks.
Spontaneous road trip: No.
You forgot to buy Christmas gifts: too bad, so sad.
Your friends have something cool and you don’t: Oh well.
Your Xbox died: Not an actual problem, move along.
As you can see, there are many inconveniences in life that may suck, but are not a valid reason to use your emergency stash. Make yourself a list of acceptable emergencies and stick to it. Obviously you can’t foresee everything that might happen in life, but use reason and be open-minded about what you’re willing to do without.
Links: How to Start an Emergency Fund, Ways to Fund an Emergency Fund, Ally Bank, and finally, There is No Such Thing as a Bacon Emergency
Working on this! I have one months pay saved now just incase something bad happens!
PREACH. Using your credit card as an emergency fund is only for the debtless and daring. Everyone else (which is… y’know, most of us) need to keep that cash reserve for sick pets and broken glasses.
