Budget 2020 — Part 2. Emergency Fund(s)
By: Kia D. Sanders
Tags: Budget, Budgeting, Saving, Saving Money, Money

Emergency Fund(s)

Our homework for this past week was to 1) write down our monthly income and expenses; 2) establish open communication with all household members; and 3) identify what we could “cut out”, minimize and/or remain the same.

Next, we will focus on our Emergency Fund — EF. This is our “cushion” in case of emergencies.

Around the time I created my original savings account, I discovered Dave Ramsey. I vaguely heard of him but did not want to pay for Financial Peace University. I wondered, what could I find with a google click? I found so much information and began joining different Facebook groups (free), researching different budget tips and using excel budget templates, off and on. He stated that if you saved for your emergency fund first, you will have better success with his plan. Although I never bought any of his materials, I credit him for teaching me how to save and become more disciplined than ever.

Your emergency fund should be at least $500. This is non-negotiable.

There are two ways to calculate your “desired” fund. I would like to provide everyone with a realistic expectation because not everyone has the means to save as much as others. Plus, aren’t we are already living on a tight budget? $500 is the minimum I am suggesting because if we fall short one day, week or month, this may set us back even more. We need to be prepared for the unknown!

· I suggest it be whatever you can afford at this time… ($500)

· Total amount of monthly bills

If you can only save $500, that’s still an accomplishment. You will just continue to add as you see fit (week 3 will teach us how to add to our savings more in depth).

I saved $1,000 initially. This caused HUGE anxiety even though I had the money to put it away. Why? I am cheap and I felt that without this money, I would be “broke”. I kept it at that amount for three months. I was scared to add to it…. DON’T BE! If only I had thought harder about this decision, I would have realized I was only harming myself in the end. I was spending the extra money I could have saved rather than using it because it was “available”.

After a few months, I felt more secure of my financial discipline and saved enough to cover my monthly bills. My current emergency fund is at Woodforest (I don’t have a debit/credit card). I became so good at this budgeting thing, I created another one. This one is with my Credit Union where I save money specifically to pay off debt in large amounts.

· What you take, you REPLACE!!!!

o You need to ‘borrow’ $150 to pay for a new tire from your EF? Once you get paid again, you replace your $150. If that’s all you can put back into it, then that’s it. If you can add $151, you are still making progress.

· Again, this is for EMERGENCIES. Not because you found a cute outfit at the mall or want to take a vacation. DON’T TOUCH IT.

o If you are fired, off work w/ no paid-time-off (PTO) or you have to cover an unexpected bill, you have your emergency fund!

Now that we know how imperative it is to have our “cushion”, we need to create savings account OR if you’re old school, a shoebox. Just make sure whatever you decide to do, you DON’T TOUCH IT…. Unless….yep, an emergency! I recommend finding a savings account that lets your garner interest.

As of now, my Woodforest account has *some* benefits (.10% APY under $10K or .15% APY over $15K).

Why I chose this bank:

· My mom has this institution. In case of an emergency, I can send or receive money from her being in another city, 4 hours away.

· I can access my money, if needed as my primary checking account is housed in the DFW area (where I recently moved from in June 2019).

· If desperate (VERY RARE), this bank is in almost every Wal-Mart and it has late hours, open 7 days a week.

So let’s recap:

An emergency fund is necessary because it allows us to have room for unexpected expenses. The goal is to become not only debt free but worry-free, as well. What works for you may not work for others this is why, it is important to have another conversation about the goal savings amount and how long it will take you to reach it. Give yourself a maximum of 3 months. Example: $1,000 / 3 months = $333 a month. If that’s too much right now, get to $500 / 3 months = $166 a month.

Part 3 will be posted Saturday. By that time we should have part 1 and part 2 reviewed with our plan in place, eager to start paying off debt! Have any questions? Please feel free to email me at KiaDSanders@icloud.com or send a private note.

xx KDS