Posts Tagged ‘emergency savings’

Your Emergency Fund-Let’s Fine Tune That Baby!!!

Thursday, April 29th, 2010

Emergency Fund

What is an emergency fund?

Emergency funds are savings accounts, built up for dealing with life’s surprises.  Some may call it a “just in case” fund.

  • Just in case the transmission blows.
  • Just in case the air conditioner condenser dies-(ask my nursing assistant what she thinks about this????)
  • Just in case your softball nut breaks her leg sliding into second!
  • Just in case you or your spouse get laid off…..

As a recent post suggested, your emergency fund gives you margin. A little space between a stressful day vs a financial disaster for you and your family.

So the usual guidance is to decide how much you would need to get by for  3-6 months without a paycheck.  This is so important, it was one of the first thing I posted about when I started blogging, “yeeearrs and yeeaars ago!!! (seems like it….)

I wanted,  today, to talk about emergency funds in a little more detail. To “dissect it”,  perform an “autopsy” or as we say in the Operating Room-let’s fine tune this baby-(well, we don’t normally say that, but maybe I will tomorrow, and see what happens!!!!

So, Let’s Fine Tune This Baby!

First, let’s see what the standard recommendations are:

  1. You are in debt up to your ………-You need just enough money in your emergency fund  to handle the most basic of emergencies.   $1,000 bucks seems to be the standard here.  The thinking is to pour your extra income against debt, then build up a larger, long-term emergency fund.
  2. You have a little/no debt, and a stable work situation-3 months expenses might be enough.
  3. You have little to no debt, but you work contract, or commission and your income is up and down-6 months to even a year is better to help you handle those unknowns.

Now for the fine tuning:

  • If you or your spouse are paralyzed by idea of only having a 1,000 bucks in savings while you are blasting away at those credit cards-bump that balance up until you both can sleep.  Having extra  money in the bank, can help your REM sleep, I promise…..
  • If you know a life event is right around the corner-maybe a baby due this year- then quit  your debt reduction temporarily,  and pile up the cash until you know  the ending of the movie-(healthy baby, and mom, and no surprise medical expenses!)
  • If you have no debt, but feel better having a huge pile of money in your emergency fund?  Then think about putting half in a money market account for easy access, and the other half in CD’s or a short-term bond fund that will pay you a little interest. (remember the post about inflation….)  If you have to grab that money, there may be a small penalty, but odds are in your favor that it will grow undisturbed.
  • Make your deposits to your emergency fund automatic, so you don’t have to think about it.
  • Make sure your money-market account is as high yielding as possible.
  • Remember, you are saving for bare bones expenses, not necessarily 6 months of your total paycheck!

A Carnival of Emergency Fund Stories

Emergency savings accounts are so strongly recommended by all the experts, there is no limit to the amount of info you can find, about the why, how, and mistakes in emergency fund management.  Here are several posts from other personal finance bloggers, to give you different takes/opinions on this subject.  Check ‘em out.

Tips on how to save up/add to, your emergency savings:

Free From Broke has these thoughts about emergency savings.

From Consumerism Commentary:  50 tips to help you build your fund-50 tips-no more excuses!!!!

Not Made of Money has these tips for funding an emergency account. Tips, tips and more tips!!!

Emergency Fund Investing Options discussed:

Cool to be Frugal, has this controversial subject, putting part of your emergency fund in a Roth IRA.

Redeeming Riches, talks about your savings safety net, with suggestions for CD Laddering-a way to maximize CD returns.

Personal Finance, By the Book, discusses the use of the emergency fund, to partially self-insure, therefore saving money on your  insurance costs-I love the idea of a high deductible health policy/tied with an HSA-makes a lot of sense….

Real world usage of the emergency Fund!

Well Healed Blog has a real world story, about her use of her “Freedom Fund”

Christian Common Sense saved his honeymoon, (and maybe his marriage) with his emergency fund!

And last but not least:

Budgeting In The Fun Stuff, has this take on Emergency Money

Learn Save Invest writes this about the Emergency Fund!

And Tom at Canadian Finance Blog, has this advice from the far north on your emergency savings!

SUMMARY:

Now, if you can’t get all you need to know about Emergency Funds, in this article, then you just don’t want to do it!!!

Don’t put it off another minute- make the call, visit the bank, or  get online  to get your emergency fund started.  And when it starts to build, return to the ideas above, to:

FINE TUNE THAT BABY!!!!

Let’s hear your thoughts on Emergency Funds-Do you have one, how big is it, have you ever used it???  Let me  know!!

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Posted in Personal Finance 101 | 11 Comments »

Emergency Money-Five Ways to Raise Money in a Hurry!

Wednesday, November 18th, 2009

One of my strongest recommendations for people trying to get out of debt, beside goal setting, and planning is the emergency fund.

See this post for more information about the super-duper emergency fund, that I recommend all  of you have and the reasons why.  For today’s post, I want to give you a few options for how to raise an emergency fund account in a hurry.

  1. For nurses, overtime is frequently available.  On one of the wards that I work, there was a sign about overtime available to work the night shift, because of a temporary nursing shortage on that wing.  Two or three extra shifts at time and a half, can raise a thousand bucks for a small emergency fund in a hurry.
  2. Sell books and text books.  See this blog post from Money Blue Book on helpful hints for those of you who haven’t sold any books online before.
  3. Have a yard sale-while this tried and true method for raising a few bucks may seem old hat, in this economy people are shopping more than ever for a bargain.  Go in with friends, and make it a fun day, in addition it will  help clean out a few closets.
  4. A second job-if overtime is not available-and these days those overtime shifts can be harder to come by, a second job working an extra weekend a month, or a couple of shifts extra on your off days-can help you pile up emergency cash.  Most nurses can find work in their field, but if not delivering pizzas or other short term work can help fill the coffers-remember this is for emergencies!
  5. Sell a toy-(no I didn’t say sell your boy).  If you have a Harley, boat, extra vehicle, jet ski ……. You get the idea.  Put it on the block.  Do an internet search to find out the going price and get it gone.  If you have no emergency money, you have no business with a toy or toys anyway-and you need to be working extra right now, not playing.

So look at the above list and find which way suits you to help build your emergency fund.  Maybe do some of it all-having a cash cushion or margin can be a life saver for those of you trying to work your way out of debt.  It can be the difference between just a bad day-having to dip into savings for a new set of tires, or an expensive medical emergency. Compare that to blowing weeks or months of hard work trying to lower your debt, then having to reach for the old credit card to pay for an emergency expense-then having to start all over.

Good luck!

For more ideas for “Emergency Money Resucitation” go to my website for my free ebook, packed with money-saving ideas.

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Posted in credit cards, debt reduction, personal finance | No Comments »

Emergency Funds: Why Millionaire Nurse Wannabe's Need One

Friday, October 23rd, 2009

Emergency Funds come in multiple varieties, kind of like the flu.  I want to hit the two main type of emergency funds and what role they play in your managing your personal finance and building wealth.

I like to call my version of emergency funds  The Super-Duper Emergency Fund.  When you give the fund a name then it provides it with more respect than just calling it a savings account.

The first type of emergency fund is a small one you establish after you finish the first two parts of my plan for financial resuscitation.  The first two parts are planning/goal setting and establishing your Financial Intake Assessment.  I will discuss those in another blog.

Once you have done a financial assessment and confirm the obvious-that you are in debt besides your mortgage, then your first step in wealth building is putting as much money as fast as  you can in an emergency fund.  It needs to be in a bank account, probably a money market savings account, that is not easily accessible for you to get into without an important reason..  Once you have put at least 750-1500 bucks, depending on your bills and debt load, then start paying off debt as quickly as possible.

The purpose of the emergency fund is to give you a cushion during your early months of paying off debt.  Science has shown that it takes at least 3 months of  a new activity to become a habit.  Controlling your spending and paying off debt will definitely be a new activity for some-and will take a while to become a non-painful habit.  Those yearnings to hit the mall, go on vacation, eat out will all be calling to you-resist you must!

The emergency fund is for those days that Satan is sitting on your shoulder saying-I will show this guy-thinks getting out of debt is easy-BANG-their goes the transmission!  POW-their goes the air conditioning, hot water heater…. you get the idea.  Life does not occur in a straight line-if you have no cushion in your emergency fund, every time you make an extra payment on your credit card debt, then an emergency comes up-out comes the credit card-their goes your getting out of debt momentum.

So the purpose of the Super-Duper Emergency Fund is to give your debt reducing efforts a little cushion so you don’t get derailed with every little speed-bump in the road.  Most people don’t get in debt over night, and it will take months, occasionally years to get out of debt-you know life will hit you with a financial surprise or two along the way-so be prepared.

I will discuss the longer term, completely  out of debt except for your mortgage emergency fund in another post.  It has a few other wrinkles to it.

If you have any questions, comments or suggestions about emergency funds,  and your efforts towards getting out of  debt, let  me hear from you.

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Posted in personal finance | 4 Comments »