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Can We Talk About Emergency Funds?

August 25th, 2017 at 02:43 pm

I saw a headline recently that 78% of Americans live paycheck to paycheck. This makes me so sad!

And then I talked to a good friend of mine yesterday who lives in the path of Hurricane Harvey. I reminded her she should have some cash on hand. She had just taken out $50. I told her more would be better. In my mind I had $500, but said maybe $200 would be good. She said although she just got paid, that she didn't have that much money! I said well since you just got paid, don't pay some of your bills you would be paying until the storm passes. Take the cash out and put it back in after the storm and pay the bills. That assumes she doesn't need it.

I'm of the belief that having an emergency fund, even a small one of $1000, is the foundation of financial security. The feeling you get when you accumulate that much money for just in case is palpable. Particularly if you didn't think you could do it. It's a feeling of accomplishment, confidence and security all rolled into one! It's also a feeling of relief when an emergency such as the one my friend is dealing with arrives and you have that money to use.

Saving that first emergency fund changes your mindset to being proactive against the unknown expenses rather reactive. If you can see that emergencies do come along and you will need money for them, then you can also see why setting aside money for irregular bills is helpful. It opens you up to seeing that you can save for other things like a new dishwasher or Christmas. And then you have saved money because you aren't charging the expense and paying interest. A proactive mindset with your money lets you see that you should save ahead for house down payments, college and retirement. Like I said it is the foundation of a solid financial house.

I can't save that much money. I will spend it if I see that money in my account. We have too many bills. Those are all excuses that block your ability to even try to start an emergency fund. Nearly everyone in the United States has the ability to save $1000. Now you might not be able to save it all this month, but any income level would likely be able to save that much in a years time. I think that is a little too long (and so would Dave Ramsey) but I would give you the grace to get it set up in that period of time. And if you want the math on that it is $83.33 a month.

And now I'm just going to do a quick brain storm of how I could find $83 each month. And honestly, the first thought that came to mind was Swagbucks! I know many people don't like it and even I get annoyed with it sometimes. But it is definitely possible to earn SB to equal a $25 deposit to a PayPal account each month.

I see my husband pick up a bottled water or soda at the grocery store at least once a week. Okay, I do it too, just not as often. The last time I remember noticing the price it was $1.89. If we could eliminate those five sodas from our spending we would save $9.45.

And at our house you have heard me mention that we spend more on restaurants than I prefer. I like to think we rarely eat out, but we do eat out. If we eliminated one trip to Subway each month we would save nearly $30.

I've been lax about using coupons at the grocery store. I think I could probably find at least $5 worth of coupons to use each month, maybe even $10. In fact, just confirm I'm right, I checked Ibotta and found the following coupons that I would use on things I normally buy. $0.25 on any item, $0.25 on fresh zucchini, $0.50 on cheese slices and $1.25 on a specific brand of bar soap. So in one shopping trip I could have $2.25 in savings. That is savings I could set aside towards my emergency fund. Again, easily $5 a month without changing spending habits, but by just finding the coupons!!

This next one is personal, and I've mentioned it here before, but I invested in a menstrual cup and washable/reusable pads earlier this year. At this point the small outlay (which I think I actually used Swagbucks to purchase) has been recouped by saving an average of $7 a month on disposable supplies. Because of my investment that is $7 I no longer have to spend. If I was consciously saving for my first emergency fund I would set that $7 aside each month.

Another one that has crossed my mind lately as a way of saving in our own home is the food we buy our cat. We've been feeding more wet food. A can a day, which is at least $0.50, often a little more. That is $15 a month. Now we do feed her dry food as well, so by eliminating wet food the amount of dry food she eats would increase, but the cost for that additional serving is far less than $0.50. Probably under $0.10. So let's assume we would save $0.40 a day, that is $12 a month.

And finally, I think I would be looking for something to sell each month while I was saving up my $1000 emergency fund. Things I have sold in the past for at least $5 include DVDs, girls jeans, Bath & Body Works lotions and sprays, kids coats and boots, Box Tops for Education, and tools. I've sold many things over the years, some online, some at yard sales. Of course, the amounts vary based on the item. Most of our homes are bursting with stuff! If you could find 12 items in your home worth $5 to sell, you would have $60 towards your emergency fund. I'm guessing many people have far more than that!

At at minimum I just came up with $94 a month I could save!! It takes effort, commitment to the goal but it can be done. And anything you eliminate for the year can be added back in. Or if you eliminate restaurant meals one month, swap it out with putting your Netflix membership on hold for a month. Be creative with how you come up with your savings each month. It doesn't have to be an elimination for a whole year!

Let me know if you are inspired to try saving your first $1000 emergency fund? Do you think you could do this?

And I'm thinking tomorrow I may brainstorm how I would come up with $1000 in one month! That is usually the best plan. Saving the emergency fund as fast as possible.

16 Responses to “Can We Talk About Emergency Funds?”

  1. crazyliblady Says:

    It shocks me that many people do not have emergency savings accounts and then I remember I used to be one of them. Mine does not have as much as I would like in it, but it is over $1000. I also have sinking funds for car replacement, home repairs, car taxes/aaa membership, escrow for escrow shortages, medical, etc. Having the emergency savings and the sinking funds are key to my ability to get our debt paid off. The things that always throw me for a loop, though, are car repairs and home maintenance. Even though I have money saved, it is not enough, so I must keep saving. My main goal right now is to pay off my credit card, but I need to save, too, so you have inspired me to do more saving!

  2. creditcardfree Says:

    Glad I inspired you Crazyliblady! You have come a long way. And I, too, find car repairs and home maintenance a bit harder to estimate.

  3. Bluebird Says:

    I agree with your thoughts. I think there are many factors that keep people from having an emergency fund or savings. One of the most important, I feel, is that people cannot discern between a need vs. a want. The TV, media, etc. overwhelm people with what they "should" have or how their homes or clothes should look, and it becomes expected and "needed". Then it's bought with credit because there is no discipline to wait until the money is in hand. Education about finances should begin in schools at a young age and continue through at least high school.

  4. Debt-free by Thir-ty Says:

    After several years of trying to get out of debt, I'm finally realizing that this is an important first step. We currently have $310 in the emergency fund. At a minimum, we're adding $50/month (that's autoscheduled), but I've been putting in at least a $100 since we add money every time we resist the allure of eating out. I think I could have done it much faster had all the the animal/car stuff not happened, but we're working on it. My goal is to have it completed by the end of the year, so I'd need to find 172.50 each month. I think that's doable!

  5. crazyliblady Says:

    I know people who seem to oblivious to the real cost of a new car, a daily cup of high dollar coffee, or an unlimited cell phone plan over a period of years. I would tell them about this, but I am afraid they are not ready to hear such a message. I just hope to be an example to others that it is possible dig yourself out.

  6. crazyliblady Says:

    @CCF - Could your husband take a reusable mug/bottle with him and fill it in a water fountain? It's all about conscious planning, making a choice to do something different.

  7. creditcardfree Says:

    @crazyliblady, yes he sure could! And he often does, but he isn't the best forward thinker at times...that is where these extra drinks come in. It's one of the things that came up in our budget meeting. We both have things to work on. Smile

  8. ceejay74 Says:

    It was really, really tough to start saving. I wasn't in the habit since draining my meager savings at 23 to move to MN. I had to start a savings account in my early 30s when I wanted to bring my fiance over from England, because you have to be able to show support. I started an account but as soon as he was over here I drained it again. Even when I got on this site I didn't do a savings account for a little while. When I did, it was just dribs and drabs, because I felt like I should be putting every extra penny toward debt repayment.

    It was my desire to have a baby that finally made me serious about an EF. I believe I started one in late 2008, so about 10 years ago. I've drained it a couple times but eventually built it back up. You're right that it does add a confidence and proactive feeling. It also makes me stubborn to touch it, so I'll do almost anything to fund emergencies through other means! LOL.

  9. creditcardfree Says:

    I really appreciate everyone sharing! I hope we can be cheering those on that need to start one and share how important they have been to our financial security.

  10. Tabs Says:

    I completely agree with you. $50 for disaster preparation is laughably low.

  11. PatientSaver Says:

    Good post!

  12. My English Castle Says:

    This is one area where I think Dave Ramsey is so right. You have to have $1000 minimum. Ramsey does give some ways to do it--from taking an extra job to selling something. Thanks, CCF for the post. I need to do some scrounging too.

  13. snafu Says:

    With such dismal statistics on savings in the general population, I doubt parents encourage their children to save a portion of sums given. We were taught to save 10% of sums gifted or earned. It was automatic to teach our DSs what we had learned and called 'money protocols'. They bought into the idea that life runs more smoothly when you manage your money, rather than having the money manage you!

    We really had an eyeopener working in other countries where CCs are not part of daily operations. Income is automatically deposited into each individual's bank account and I believe 3 transactions are 'free' per deposit. With accommodations including basic utilities most often an employment benefit, staff generally divide their pay cycle in third's withdrawing funds to service needs/planned spending via ATM. What was startling was the attitude of run out of cash...stop spending until 2nd planned withdrawal. No angst.

    Money was a popular topc for my students who were practicing their oral English delivery skills.

    I was surprised that most phones were bought [cash] in a 'refurbished' secondary market that functioned like familiar' Best Buy.' Clients add 'time' to phone based on client's anticipated use. All convenience stores sell extra time and 'Octopus' cards that gave easy to use access to all modes of transit, including significantly higher cost taxis.

  14. FrugalTexan75 Says:

    We don't have $1k in an EF per se, but if we had an emergency come up, we have a lot of sinking funds we could borrow from. I am working on getting the actual EF rebuilt in our actual checking (put it in the ROTH .. so we DO have it - just not easy access)

  15. rob62521 Says:

    A well written post. You have it exactly...most don't want to find ways to save and would rather complain. Last night on the world news, they interviewed a lady who lost everything in the hurricane. The reporter asked why she didn't evacuate since they had been warned and she said without a pause she didn't have the money to go anywhere else. Very sad indeed. I'm sure she isn't alone.

    Snafu, I can tell you that savings is not a part of most people's lives and it doesn't matter where they fall in age or economical status. We are friends with a couple who he has a huge pension and also gets some Social Security yet they have no savings. None. They live with credit cards and home equity loans and complain how far in debt they are going. Another couple are always looking for ways to save and he has a zillion spreadsheets for budgets and such, but they have already raided their 401Ks and IRAs and have hit principal and they aren't that old. When I was still teaching, I would try to do a unit on basic spending and saving with my class and it was so foreign to most of them.

    When I was still working, at the beginning of the month, I would put so much money into our accounts, one was savings, one was emergency, one was home improvement, one was vacation, and one was Christmas Club. After our church and other charitable contributions and paying our regular bills, we had some wiggle room for money and when we had extra after day to day living, we would put some of it away when we could. Most of our friends don't and our financial advisor has commented that we are rarity in today's society.

  16. LivingAlmostLarge Says:

    I am lazy. I just keep money in a checking account and call it done. We don't bother cash flow either. I tried but it's easier for us to save and then spend the rest.

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