Here are some ridiculous things that have happened to me recently:
-I paid $75 to get my car emissions checked out in July (I had until the end of September to get it done). I sold my car in November. Apparently if your emissions inspection is over 90 days old when you sell a car you have to do it again. Doh! Paid $75 to get my emissions checked again in November…wah waah.
-I suddenly had a swollen, painful eye. Did you know you can have allergic reactions ON THE INSIDE OF YOUR EYELID?!? Eye doctor’s appointment without vision insurance: $70.
-The very first time I ever drove my (saintly) boyfriend’s (fancy) car…I might have had a little love tap with another car. Goodbye $600. Hello confirmation that my boyfriend is the most patient man in the world…(although I am no longer allowed to drive his car).
-I got a letter from a state I have not lived in for a decade telling me that I owed taxes on a car that I no longer own. Since I don’t own the car anymore, I didn’t have access to the paperwork proving that the car was registered in a different state during that time period so I didn’t actually owe taxes to the first state because I paid them in the second state… please enjoy my $120, you crumb bums.
All of these things were ridiculous and crappy and I was mad that they happened to me and I was mad that I had to spend money on them. I am sure you have an equally ridiculous list of things you have had to spend money on that you really didn’t see coming (for your sake I hope I just have truly terrible luck and things like that don’t happen to other people).
For me, the only good thing about these events was that I didn’t have to go into debt to pay for them. That is because I had an emergency fund. An emergency fund is a savings account that you keep on hand for stupid, crappy emergencies. When I was thinking about this blog I tried to think of a good emergency that you would be happy to pay money for and the only thing I could think of was if you found an adorable puppy on the street and then you got to adopt it and you had to pay some vet fees. So if that happens to you, HOORAY! You win!
Otherwise, emergency funds aren’t that exciting except that they save you from the only thing worse than crappy expenses, and that is paying interest on the debt you accrued when you had to pay for crappy expenses that you didn’t have enough money for. Some guidelines for an emergency fund:
-It is recommended that you keep enough in your emergency fund to cover three to six month’s worth of expenses. This will cover you for a bit in case you unexpectedly lose your job and it will give you time to get back on your feet.
-How do you know how much three to six month’s worth of expenses is? Aren’t you tracking it as part of your budget planning? 🙂
-It will take some time to save enough money to have a meaty enough emergency fund. Although other things will be more tempting (ski trips, new shoes, basically anything else is more tempting than saving for the horrible things that you don’t want to pay for….), try to prioritize saving until you have enough of a cushion. It can pay off massively in the long run, and then you won’t have to spend your shoe budget on interest you racked up when paying $800 for a dent in your roommate’s car door that happened when the wind blew the door out of your hand that REALLY wasn’t your fault (yup, that happened too).
-You should be keeping your emergency fund in a savings account. That means you are earning a little more interest than in your checking account, but you still have access to the funds within a few days. Don’t count on your investments as your emergency funds because there is no guarantee that your investment will not be in a downturn when you need the cash most.
-A separate savings account for an emergency fund is also helpful because it earmarks your money and helps you keep your finances organized.
-Hopefully, you have already gotten the hang of automatic bill pay. Automatic bill pay works great when you are dividing up your funds among different accounts, too. In this case, have your bank automatically transfer money from your checking account into your emergency savings account. Then you won’t accidentally spend your emergency fund and you don’t have to worry about it!
-I am going to go ahead and recommend Mint.com again as an amazing tool. Mint has a great system that allows you to track your goals. It shows what your end goal is, how much progress you have made, and how much longer you have until you reach your goal. That is how I know that I can expect to get Lasik in 2019.
-If you have a big change in life- get married, have a kid, get a new job- your expenses will change too. Make sure your emergency fund mirrors your spending. If you suddenly find yourself with more responsibilities (triplets!?) you might want to consider the six month’s worth side of a safety net.
-The best part of an emergency fund? Once you have a cushion that you are comfortable with, you don’t have to save for emergencies any more (well, you have to replenish the fund if something unexpected comes up). But that means that when you have a cushion, you will suddenly have all of this money that you had previously budgeted for an emergency fund, and then you can spend it all on whatever you want!
You are now one step closer to being a truly amazingly responsible adult. And if you find a puppy on the road, YOU CAN AFFORD TO KEEP IT! Lucky duck!