My husband and I, however, have nothing designated specifically for an emergency fund. I know, that’s horrible, right?
Well, we have saved up a significant amount of money for a down payment on a house, and since we still haven’t bought that house, we have been using it as a dual house down payment/emergency fund.
We also have a small $1,000 emergency fund for a rainy day, which means should anything break, or we receive an unexpected ticket, bill, or have to pay the deductible on our car insurance policy.
We have quick access to this $1k as it’s sitting in a savings account directly connected to our checking account, which allows you to make transfers instantly.
Whether it’s a rainy day, or a long term emergency, it’s always a good thing to be prepared.
A lot of people get overwhelmed when they think about the amount of money they have to save, but as anyone will tell you, slow and steady wins the race.
Here’s how we finally got comfortable with our rainy day fund.
Start Small with Your Goals
When you think of saving six months’ worth of expenses, heck even three months’, you automatically think that saving that amount of money is impossible.
But Rome wasn’t built in a day, and even if you start by saving $5 a day, that’s still an average of $150 a month. Just because it sounds impossible to save that much, doesn’t mean it isn’t possible.
Save as much as you can and just keep contributing without giving up, because eventually you’ll hit your goal. And you’ll feel really good when you hit that first milestone.
You Can Get By With Less
Chances are what you’re spending per month right now, is not what you’ll be spending per month in an emergency.
For starters, if you lose your job, you automatically go into survival mode. You watch what you spend, you stop eating out, you don’t buy new clothes, and you cut every non-essential expense possible.
So when you’re calculating how much you actually need to save, think about your bare bones expenses. This means, how much money do you need every month to pay your rent, your bills, your groceries and health insurance.
Don’t forget that you’ll also be able to claim unemployment, which means you won’t be living off just your savings the entire time. But your savings will help supplement your unemployment, which is usually a fraction of what you were normally getting paid.
Extra Sources of Funding
Lastly, don’t forget that in a real dire emergency, you also have to consider your liquid and non-liquid assets. What would you be able to get rid of or sell that would help you get through these hard times?
While it’s never recommended to touch your retirement accounts, the reality is that you aren’t going to become a bum on the street with $100k sitting in a retirement account. Think of how much you could live off of if things really got rough, and hope that it never has to come to that situation.
If anything, this should scare you enough into thinking that you really need to get your savings in gear!