Reason #354 to Have an Emergency Fund...

...because it might not be your emergency but you will need to help cover it.  Hubby has kids scattered all over the country and all over the world.  While they are all adults and quite responsible, one is a hot mess.  The hot mess one lives smack dab in the eye of the hurricane heading to North Carolina.  We were worried about him, mostly because he has no license, no car, and no money so when I asked if he was going to evacuate ahead of the hurricane he said he had to because the evacuation in their area was mandatory.  When I asked how he would evacuate he said he thought he might ride out with a neighbor.  When I asked where they were evacuating he said he didn't know.  When I asked if he had money to evacuate he said not really but they would figure out something.  ayayay

We've helped out all of hubby's kids financially over the years but it is usually for some totally unexpected emergency.  This kid we tend to worry about the most because although he is nearly 40 years old, I swear he can't make good decisions to save his life!  So we will send him money to help him out because while we don't pay bail or child support or other bills that the kids need to man up and pay, we are more than happy to help out in life and death situations.  And this looks like a pretty critical situation.  So, while it is important to have an emergency fund to cover your own emergencies, it is just as important to have a fat and fluffy emergency fund to help out loved ones in a crisis.

Reason #243 to Have an Emergency Fund

It is monsoon season in Las Vegas and last night we got hit pretty hard.  There was a massive rain storm, lots of wind, the power went out in various parts of the city, and there was a lot flooding too.  When we woke up this morning we saw that the neighbor's tree had fallen over into our yard.  When I did a quick Google search about who is responsible if the neighbor's tree should fall into our yard, I was surprised to find out that WE are responsible if something falls into our yard or on our house!  Fortunately we have nice neighbors and the guy came over and cleared the tree out saying it was his tree and he would take care of it but if it would have damaged our house we would have had to file an insurance claim and pay the deductible which is around $1000!  Needless to say many people are probably surprised that the neighbor wouldn't actually be responsible for the tree and according to this story, only 39% of American's have the savings to cover a $1000 emergency.  So this is a reminder to get your emergency fund set up and funded as soon as possible in case of some sort of unexpected emergency!

Can You Cover a $400 Emergency Expense?

According to this article, 40% of Americans CAN'T cover a $400 emergency expense which is really concerning.  It isn't if but when an emergency will happen and the fix will require money.  Just within the last year or so we have had several unexpected expenses, some of which would have been big problems if we hadn't had the savings to cover them including a dead hot water heater, a 30 day notice to paint all of the trim around the house by the HOA, plumbing issues, and kid issues (ie: a couple of kids had unexpected emergencies and didn't have the savings to cover the problem so we gave them the money).

Needless to say, having money in savings is critical for your peace of mind and well being.  Every day people have financial issues which can range from minor (they don't have enough money for an impromptu lunch out with co workers) to major (they get sick, miss days at work, their paycheck is short, and they can't cover the rent which leads to eviction!).

The need for an emergency fund is so important, that even if you are swimming in debt, financial expert Dave Ramsey recommends that you put aside money in an emergency fund first to cover unexpected emergencies before doing anything else to get out of debt.

If you don't yet have an emergency fund, this should be your top priority.  You can find several ways to quickly bulk up your emergency fund here, here, and here.

Bulking Up Our Emergency Fund

I will get my first paycheck in a few days and it will go directly into savings for our emergency fund.  Since we moved into our house, our emergency fund has hovered in the couple thousand dollar range when it should be sitting at the $10k+ range.  Without this cushion I haven't been financially comfortable because of all of the things that could happen that would create a financial disaster due to the fact that we have such an anemic emergency fund.  Among the disasters that would require more than a couple of thousand dollars to fix:

• Our one and only car gets wrecked (since we only carry liability on our old car, if the accident were our fault we would be minus our only car and would need more than $2000 to buy a suitable replacement).
• Our air conditioning system dies (we would be just fine if our heating system dies--it doesn't get that cold here and we could use space heaters--but air conditioning is A NECESSITY in Las Vegas.  And a new air conditioning unit could cost up to $5000!).
• One of the kids has a dire emergency (all of the kids are scattered around the US and one is in the Philippines.  If one were severely injured or had another critical emergency, getting to them, renting a car once we got there, funds to help out their family, and other travel/helping expenses would cost way more than $2000).
• One of us has a dire emergency (when one person in the family has a dire emergency--like being severely injured or having a severe medical crisis--the average cost of living, even though our house/car/everything else is on hand, can still grow exponentially.  Fortunately we have full coverage medical insurance but additional costs--like driving to the hospital and back daily, eating out every meal, other extras incurred when one is hovering between home and hospital--can grow exponentially and blow through a tiny emergency fund in days).
• The government goes over the financial cliff (because we both rely on the hubby's income and because both of his monthly checks are issued by the government--Social Security and pension--one glitch in the government's financial system could leave us without an income for a month or longer.  Thus the need for a much bigger than average emergency fund).
• One of us dies (knocking on wood that this doesn't happen for a very very long time...but an unexpected death has many expenses including a funeral, cremation/burial, probate costs, etc).
• We get divorced (ditto the knocking on wood thing but I've seen way too many people surprised by their spouse filing for divorce and neither them nor their future ex have any cash on hand and things go down hill from there.  If one or both or the parties don't want to end up homeless during this trying time, an emergency fund that is split by both is better than being penniless).
• A natural or man-made disaster strikes (you see all of those houses destroyed by wildfire in Colorado this week?  It made me think about what would happen if we were impacted by a similar disaster.  We would need to pay for a hotel or other place to stay, we would need to replace clothes and toiletries, etc.  Insurance would come into play eventually but the moment a disaster happens is when you need immediate cash on hand).

That's all of the terrible things I can think of now but you get my point.  Without a fat and fluffy emergency fund, a major crisis can have a majorly bad impact on your life.  That's why all of my hard work is going towards bulking up our emergency fund instead of to something more fun...like shoes :)

Remember That Emergency Fund I Was Talking About Yesterday...

Yesterday I posted about the need for each person to have their own emergency fund.  At the time I was thinking about each adult person in the family in case something happened to their SO and they needed some cash to get through the first few days or weeks after a crisis.  I'm beginning to think that everyone in the family should have an emergency fund because of what happened yesterday.
Last night I was perusing reddit and came across this post.  When the kid first posted I was thinking that's odd, maybe it is a sick joke (there seem to be a lot of teenage boys on the site and sometimes they just like to get attention). Then I thought that maybe it could be true. Then when I read the follow up, I nearly fell off my chair! How horrible for a teenager to be watching the news and see their dad's car in a fatality accident. Then if you read further through the comments you see that not only did his dad really die on the way home from work yesterday but his mom had died a few years earlier. And his concern, among other things I'm sure, is what the family will do for money because they were broke and his dad was the only wage earner.

That kind of tragedy makes me think of what kind of precautions should be taken in the event that something happens to both parents and there are kids in the house. Obviously putting $1000 in a savings account and giving access to it to a teenager is a bad idea but some sort of emergency fund should probably be established for your kids that they could somehow access in the event of an emergency. Just an idea...

And This Ladies (and Gentlemen) Is Why You Need Your Own Personal Emergency Fund

I was reading Judy's blog yesterday when I saw this post and then it struck me....not only do you need a family emergency fund, but each person should have their own individual emergency fund as well. 
For the hubby and I, our money has always been separate.  We each have our own separate bank accounts and we each have small emergency funds (around $1000 each) as well as another account where the bulk of our savings goes which we use for travel and larger purchases.
I have seen it happen far too often where life is going along swimmingly and suddenly one spouse is blindsided by the other and then not only is that person tossed into the throes of crisis, but they are often left without money to boot.  This happened to one friend when out of the the blue her husband called and said he was moving out and they would be getting a divorce.  I mean, they had been married for almost 25 years and she had no clue that he was even thinking of such a thing.  Another friend had been married for many years and everything was going well, she and her husband even had a cruise booked, and then he died suddenly.  Yet another friend had been living with a guy for nearly a year, he was even paying most of the household bills, and then one day he called her from jail saying he had been arrested for outstanding warrants he had from another state.  There went her boyfriend AND the income he was providing towards their household expenses.  Those are all horrible scenarios yet they happen in real life all the time.
Mostly it seems like these things happen to women, but they can happen to men as well so everyone needs to keep their own private stash of cash to use in an emergency.  When you are in the middle of an immediate crisis that you had no idea was about to happen, the last thing you want to do is to have to scrounge under the couch cushions to try to gather enough money to feed your kids that evening.
Here's some guidelines:

• I don't think your personal emergency fund should be a secret from your SO.  In fact you should encourage them to put together their own personal emergency fund as well.  Hopefully you will never have to use it because your SO called to say they want a divorce or their girlfriend just showed up on your door step, but there are many other life-altering events that could happen such as your SO suddenly dying or being in a major car wreck which leaves them in the ICU for days or weeks on end.  By having your own emergency fund and knowing that your SO has theirs, both of you will still have the money to function in the midst of a crisis.
• I don't think your SO should be able to access these funds and vice versa.  Too many times, whether because of greed or just because one partner was pissed off, I have seen people who thought they had an emergency fund go to the bank and find out that their SO had cleaned out their entire account and left them penniless.  Obviously, in the event of one spouse's death, the other spouse would be able to access these funds eventually but while you are both alive and kicking, the money in your private emergency fund should be all yours so that you can rely on it being there in an emergency.
• I don't think the fund should be huge.  One or two thousand dollars in each person's fund should be fine.  Ideally you would only need to use these funds for the first week or so of a major crisis at which point you will have had time to come to some sort of terms with your SO or have the power of attorney invoked so that you will be able to access/use your joint funds. I think that if one spouse feels that they need $10,000 in their own fund, then there are probably some pretty big issues in the marriage and maybe that money should go for a marriage counselor or something.

So that is my take on the whole emergency fund thing.  I really don't think of separate emergency funds as "I'm getting ready to leave you or for you to leave me" funds but rather a cushion that both spouses have to protect them during a crisis.  I am confident knowing that my private fund is waiting for me if I need it and I am equally confident that should the hubby have a crisis (maybe I become the one who is incapacitated or something), he will have the cash on hand to respond to an emergency with or without me.

My Emergency Fund is Having an Emergency

My little $1000 emergency fund which has been sitting in a savings account for more than a year just took a $600 hit. I am not happy. It caused near physical pain when I had to withdraw the money from that account today. Bummer.

Right now we are living on a pretty tight budget since I am not working. A month ago, I noticed that our cell phone bill with TMobile was averaging $100 a month for not a lot of service (two lines sharing 1000 minutes a month, plus we had to pay extra for text messaging and internet). Then I noticed that TMobile now has a $30 per month pre-paid plan which includes 1500 talk and text minutes plus internet. For two phones that is only $60 per month, a much better deal than we had. I did a quick calculation and found that by discontinuing our contract cell plan we would save $40 per month. Due to the hefty $200 per line cancellation fee, it was a big $400 payment at once but the contract still had many months left and after ten months of using the prepaid plan we would then be ahead.

So I went ahead and cancelled the contract and switched to the pre-paid plan. I got the final bill today with the two cancellation fees and the last month's phone bill plus tax which ended up to be about $540. I am happy with our pre-paid plan but paying that big bill all at once made me run to my emergency fund because the income I make (about $200 a month from AdSense and website updates I do for a couple of clients) only covers my monthly bills (cells at $100, tithe at $50, and $50 spending money).

Hubby also had to reach into his emergency fund today to send his daughter $500 so both of our little emergency funds are now even smaller. We didn't want to take the money out of our travel/resettlement fund since we will be having some big airfare bills coming up in a few months as well as the possibility of first/last/deposit for an apartment at the end of the year. Hubby's monthly income (about $2000) is used for our monthly spending (food, gas occasionally, entertainment, lunch out occasionally, sundries, etc) and the rest is put aside for our annual and semi-annual bills (storage unit, car insurance, grandson's education, etc).

As it stands now...

• I am a bit freaked out that $500, an amount I would pay for a purse or pair of shoes in my previous life, is such a big deal.


• We need to put $600 back in my emergency fund ASAP.


• We need to put $500 back into hubby's emergency fund ASAP.


• I need to see how creative I can be. At this point we have nothing to sell on CraigsList or EBay for some quick cash and working at a regular job is a bit out of the question since we will be leaving in about a month.

So now I am pondering my options to make some quick cash (which should make an interesting blog post). I'll let you know what happens.

10 Things About Your Emergency Fund

My emergency fund has saved me on more than a few occasions. Everything from late checks to car problems to house problems have been quickly remedied because I had the cash on hand to cover the "emergency". Here's ten things I have learned about having an emergency fund:

1. $1,000 is a good amount to start with for an emergency fund. Although some people say you need six month's worth of living expenses in your emergency fund, when you are digging out of debt, a smaller emergency fund is fine. Let the bulk of your extra money pay down 18% debt instead of parking it in an account earning a paltry 1%.
2. You can put $1,000 in an emergency fund in fairly short order. When I first heard (from Dave Ramsey) that I needed an emergency fund, I was so deep in debt I thought there was no way I would be able to put that much money aside and not use it. After all, nearly every day I was having a financial emergency (usually of my own making). However, it is amazing what you can do when you are 110% focused on a goal. I CraigsListed stuff, I eBayed stuff, I sold my jewelry, I forced myself to put money into the emergency fund first before paying anything else. In less than a month I had my small emergency fund set. And you can too.
3. The stars will conspire against you as soon as you get your emergency fund set up. I don't know what the deal is but I have heard this from many people. As soon as they had an emergency fund, emergencies started happening on a regular basis. I remember our furnace went out in the dead of winter ($985), the car's engine started sucking air (I'm not sure what the problem was but it cost over $800 to fix), another car problem cost $900+ to fix, someone threw a rock through our window (I think they had the wrong house but the damage cost $500 to fix)...you get the idea. The good part was that we had the money in our emergency fund to fix these problems where as before we would have just added it to the credit cards, paid the minimum monthly payments, and ended up even further in debt.
4. When Murphy's Law starts hitting you from all sides, you need to refocus your efforts, and any time your emergency fund drops below $1,000 you need to immediately work to build it up again. Eventually another cosmic law takes over and the emergencies seem to taper off leaving your emergency fund in tact for longer and longer periods of time.
5. Your emergency fund can be used only for emergencies. Your emergencies. It is tempting when you have money "just sitting there" to qualify all kinds of things as an emergency. Your retail therapy sessions, your friend's latest crisis, a much needed vacation, etc. Don't do it. Unless there is a possibility you could DIE unless you use the money (no furnace in January certainly qualified) then don't touch your emergency fund.
6. You want your emergency fund in a safe, yet liquid, place. This generally means a bank savings account. Leaving that much cash at home can be too tempting to you (and burglars!). Putting the money is a CD or IRA means you can't get at it when you need it without penalties.
7. You can use your emergency fund for inspiration. When I first put my emergency fund together and got the bank statement showing that I had a little over $1,000 in my savings account, I posted the bank statement right next to my computer where I would see it every morning. This inspired me to keep working at paying off my debt. After all, if I could have $1,000 on a bank statement with my name on it, I could do anything!
8. Don't tell anyone about your emergency fund. I don't know about you, but most of my family is flat broke. If they had heard I had $1,000 in cash, they would have come up with all sorts of very convincing reasons that they needed to "borrow" money from me. And from experience I know that they are generally never able to pay me back. It is just easier all around if you keep your emergency fund to yourself.
9. Make your emergency fund work for you. Now that you have some money, you might as well make it earn its keep. Unfortunately, interest rates are super low at this point, however make sure you are at least earning something on your money by putting it in an interest-bearing account.
10. Your emergency fund should grow just as soon as you pay off your debts. This is another Dave Ramsey rule and it makes absolute sense. When you are debt free, you will have lots of extra cash to put towards growing your emergency fund to what is normally considered adequate--about six to nine month's worth of living expenses. The good news is that this number will now be lower than when you began your journey because your living expenses will be minus all of the debts (and therefore monthly payments) that you just paid off.

Do you have an emergency fund? If the answer is no, I can't recommend highly enough that you make putting together a small, $1000 emergency fund your most important task. Start now!

How I Funded My Emergency Fund

A few months back I got totally serious about getting out of debt. I had been listening to Dave Ramsey for maybe six months by then but still felt that there was no way I could even begin to get my baby emergency fund together let alone go without using a credit card for a month. How was I supposed to put $1000 aside? The only time my bank account sees that much money is the day after payday--a couple of days later it is always back to double digits as I use the money to pay my bills. Then I got irked at a credit card company.

I used their credit card but not often and had a really low balance on it but for some reason I started getting more than a dozen calls A DAY from them saying that I was behind in my payment by a week or so. I wasn't behind in my payments with them though. I thought they had made a mistake and would figure it out but after three days of continuous calls (literally dozens a day from a computer) I called them and asked what the heck was going on. The lady checked my account, said she didn't know why it was happening, and said the calls would stop.

That weekend we were having a garage sale so I used some of the proceeds to pay off the bill online. I then called back on Monday and told them to cancel my credit card. When she asked why, I told her if that (meaning the onslaught of computer calls) was how they treated their customers I wanted no part of giving my business to their company. She apologized but by then I was pretty irked so I insisted that she cancel the card. The feeling of having power over a credit card company--something that had never happened IN MY LIFE--was like your first hit of crack (I'm guessing...I've never used crack but it seems fitting what with the blissful high people talk about but that's a different blog...). Anyway, after that call I was psyched. I didn't feel like I had lost anything but rather gained something indescribable...like a mix of power, pride, and control.

So my next step was to fund my small emergency fund with $1,000, then as quickly as possible pay off my last remaining credit card, figuring that instead of needing my credit card for a crisis I would actually have CASH to cover the things I would usually use my credit card for. So the ways that I both paid off the last credit card and funded my emergency fund at the same time included a mix of:

• Garage sales. We usually had one a year but this year had two. The first garnered about $500 and the second brought in around $200. I found that huge signs on the busy roads around our house coupled with ads on our local Craigslist brought people out of the woodwork...the road in front of our house looked like downtown LA at rush hour.


• Craiglist. I love Craigslist. Hubby was worried that murderers stalked the Craigslist site what with all of the bad publicity that came about after some high profile assaults and murders related to the site some time ago, but we have found nothing but wonderful people who have answered our ads. And we had plenty of ads. Everything that would bring more money via Craigslist than at a garage sale was advertised--basketball hoop, patio furniture, bikes, etc. all got sold.


• eBay. I usually sell small, higher value items on eBay such as cell phones, digital cameras, etc. We sold a couple of things this way which added to our emergency fund.


• Sold gold. One day driving down the street I heard a radio ad about selling your gold. I always heard that these places were a rip off but the idea of making money from the clump of broken gold chains and bracelets that had been collecting dust for over a decade was appealing. I called a local jeweler who had been in the community for ages and had a good reputation and found out that they bought gold. I immediately collected up all of my broken and unwanted gold things and brought them to the jeweler where he cut me a check for over $700! I hadn't seen or used that jewelery for literally more than ten years so it wasn't like I missed it when it was gone.

So there you have it. Almost $2,000 earned within a couple of months that went to start an emergency fund and pay off my last credit card. When you are pissed off and totally intense, miracles can actually happen. Best of all, I used to use my credit card when I ran out of money justifying that I would pay off the balance the next month. With my emergency fund, I don't have that attitude. My feeling is that the $1,000 I have in my emergency fund is ALL that I have in case of an emergency. I would no more want to spend that money, even a little of it, even if I could repay it next month, than pull my eyes out. You don't have that same emotional feeling with a credit card.