Thursday, October 24, 2013

Glad To Hear Rourke Listened About Emergency Funds

John Rourke raided his Emergency Fund recently. I'm glad he listened and set some money aside. While that's never fun it is the reason we set aside emergency funds. My thoughts on how he could reestablish it are based on what we have done in the past.

"Glad to hear the savings helped out! As to (re) funding the emergency fund.

What we do is consistently (probably 9/10) save a given amount each payday. For the sake of simplicity lets say it's $500. Say a hundred and fifty goes to retirement strait off the top which leaves us with $350. Say we save another $50 for some mid term goal leaving $300. We save up $300 a month till we reach whatever we consider comfortable for the emergency fund. After the emergency fund is topped off we start making extra payments on something, save for a car as one of them is perpetually getting old, etc all.

Say the furnace goes out or there is a significant unforeseen medical bill/ whatever. It comes out of the emergency fund. Then you go from saving that $300 for extra principal payments/ a car back into refunding the emergency fund.

Well that's my .02 cents on that."

My only note after reading this again is that the savings comes out FIRST. Get paid and before you do anything else transfer that to another account, get it in cash and put it away separately or whatever. If you wait till the last 2 days of the pay period (or whatever cycle you get money on) to save THERE WILL NEVER BE ANY MONEY. On the other hand if you pull it out first, the money will be there to set aside, then you just live on whatever is left according to the budget you use. This is called Paying Yourself First and is a pretty important concept in functional personal finances.

This is also a reminder that you are far more likely to need money right now than big buckets of wheat, arctic sleeping bags or cases of ammo.

Got Emergency Fund?


Anonymous said...

George Clason-Richest man in Babylon
Pay your self 10% first

Anonymous said...

Nicely done, Ryan, in all respects.

Personally, I've found that keeping the emergency fund just a little inconvenient to access helps to maintain it. Usually, a work-around to using it can be found if I put my mind to it. We built it up during a hard time, and we just hate to build the habit of tapping it, even if that is what it's there for. Those dollars were way too expensive, if you know what I mean.

Still and all the purpose of an emergency fund, is to fund emergencies. I get it. Just don't like it.

Anonymous said...

Yup, the last two years, the company Christmas bonus evaporated (no soup for you!) and property tax statement needs to be paid by end of January, just when the Christmas bills begin arriving. I put in an extra $100 in my cookie jar for this every pay check. Kinda sucks - I always used the bonus to pay for the taxes and its loss is felt.

I use to save $200 every paycheck (bimonthly), but the past couple years, its become much more difficult to CONSISTENTLY do that - little incidental expenses flea bite me and I find myself dipping into that account much more often. The paychecks aren't keeping up with cost of living at all - green shoots my a$$!

Anonymous said...

Emergency funds are indeed a 'good idea'.

Might want to also consider having an EMERGENCY!(eleventy-11!!!) fund, as well. Something that's incorruptible, non-serialized, inflammable, inorganic, international, historical, non-attributable, indestructible, and immutable.


Commander_Zero said...

Baby Step #1 FTW!

Theother Ryan said...

@5:10, We keep ours in a different bank. Can get to it easily but it takes conscious effort.

I think having criteria for exactly what constitutes an emergency (ie not a pizza or a weekend vacation) is a sound idea.

@5:55, Finding a $$$ amount you can consistently save takes some effort for sure. Too little and it takes forever to add up; too much and you either can't do it on a regular basis or are always short elsewhere.

Snoop, I agree but transferring metals into money TODAY at whatever rate the market says isn't the best option out there. Invariably the transmission in the car will go when silver and gold are down, etc. To me PM's serve a slightly different purpose.

Zero, Yes it is.

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