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Live and Learn

Personal finance topics with a real world touch... 
and puns, because they make everything more amusing.

In case of emergency...

If you read the last post, you know when (or for what) you'd use your e-fund. Now let's give some thought to how much you want to try and save. There is no magic number that is exactly right for everyone. Here are some things to think about when deciding your amount.

  • How likely are you to lose your job and for how long? You'll need to cover your living expenses if you don't have income. (If you have unstable position or unpredictable income you need to be more prepared to weather tough times. If you have a skill that would allow you to take a job in the meantime, that can decrease the amount of time you would be without case.) Covid-19 found a lot of people without income, even those who thought their income was very secure. Even those who could keep their paychecks found themselves stuck outside of their country unable to work. The point is, ya never know.

  • What can get in the way of you making the money you need to survive? If some amount of money can prevent you from having to take a day or more off from your job to deal with an emergency, that's a good place to start. (If your car is the only way you can work, you need to be able to get it fixed, rent another, or pay your car insurance deductible. Backup childcare is another item that could help you in a jam, allowing you to continue working and being paid if your regular childcare falls through.)

  • Speaking of deductibles, if you have a medical crisis and need care you'll either need to pay for your care out-of-pocket or pay your insurance deductible. (Having money saved in case that happens can help you avoid medical debt. There are currently almost 80 million people in debt due to medical bills right now. Savings may not have helped all of them, but it could help you.)

  • Do you have anyone counting on your for their care? Any number of things can pop up with kids, and veterinarian bills are expensive if you have pets. (Many things can be planned for so do budget for some care for them, but kids and pets like to eat things they shouldn't, jump on to or off of things that are too high, and generally hurt themselves in often very creative, unexpected ways.)

  • What about things that you are responsible for taking care of? Mainly, that's going to be a house. Furnaces break, pipes burst, there are lots of issues that can pop up in a house. But also think of anything else you are responsible for maintaining that could cause you financial trouble.

  • Are there other sources of money you can tap into in an emergency? While putting expenses on an interest accruing credit card is not ideal, it is something to consider when figuring out an e-fund target amount.

If you have zero saved right now, make a list of a few things that you would consider a financial emergency. Circle the ones that could be taken care of with $500. If most of them would be, then that's a good place to start. If you need more, then increase your goal to make sure you're covered.

Does this make your head spin? Financial Coaching may be right for you.  I can help you sort out your money and get you heading down a path towards joy.  What are you waiting for?  I'm here.

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