Emergency Dry-run
Posted by Gail | Filed under Budgets
One of the things people seem willing to ignore is the whole need for an emergency fund, and I thought giving you a challenge might help put things in perspective. So today, I want you to think about what you would have to do to cope with a financial setback.
Imagine for a moment that life has taken a chilling turn and the crap has hit your fan. Hey, I’m not trying to be a downer. This is in the name of “preparation.” It’s kind of like those fire drills they run at school so the kids know exactly what to do if there is an actually need to get the hell out fast.
You’re going to remake your budget as if your primary breadwinner has just lost his or her job. It’ll mean knowing exactly how much money you have, and how you’ll spend it. It’ll mean knowing immediately which categories can be eliminated and which must be cut back to the bone. And it’ll be a blueprint for what you can do, so you know you can cope.
One of the biggest problems people have when they find their financial circumstances have changed is accepting and dealing with their new circumstances. People hate change. They want to pretend it’s temporary or that it won’t have any impact on them at all. They dive into denial and by the time they surface they’re deeply in debt and can’t see any way out. Having a plan for how you’ll cope with a set-back is one way to make like a boy scout and Be Prepared!
You’ll start by considering all your sources of income. If you have another income earner in the family, that’ll help. If you’ll receive employment insurance or other forms of government support, that’ll help too. If you have an emergency fund, you’ll be able to see just how much you’ll need to use each month, and how long your EF will last.
You’re also going to have to prioritize your expenses. Clearly housing and food will take priority. But even within these categories you may have some room to maneuver. If you have a mortgage that let’s you skip a payment, you’ll have to decide if you’re going to use your skip right away, or save it for down the road. If you’ve been eating steak and sea bass, you’ll be stocking up on pasta and sauce and looking for 37 ways to cook ground beef. You’ll want to inventory your cupboards and your freezer to see just how much you could trim back on your food budget given your usual storehouse of supplies.
Some categories can be eliminated completely at least in the short term. Phones, cell phones, cable or satellite, entertainment, clothes (except for essential kids’ stuff) and gifts can all be cut out completely. What else can you trim? Where else can you shave a couple of bucks off to make the money you do have last longer?
It’ll be important that you track any big expenses that may be coming in so they don’t blow your plan out of the water. If you usually pay your house insurance annually, and the bill comes in during your dry spell, you may want to switch to a monthly payment so that you can scoop the money you’ve been saving for your home insurance into your emergency fund.
This is going to be your plan for how you’ll use your money while things are tight. With time and a plan, you have the flexibility to think of a variety of strategies to cope. And you’ll be prepared with alternatives just when you may be least able to think clearly because of the panic in your belly. Hopefully you’ll never have to use your plan. But if you do, you’ll have a clear idea of what comes next.
May 6, 2010 at 6:35 am
been there and done that:)…planning makes a HUGE difference when the crapstorm comes your way…having cash set aside (not available credit…that ain’t an emergency fund!) and cutting back on ALL the non essentials will keep you going…even if you know you have 6 months of expenses set aside…consider the possibility that this could go on longer than 6 months…so you’ll still want to cut back and save where you can…our crap storm lasted 4 months…and if it ever happens again we will be prepared!
May 6, 2010 at 6:39 am
I keep a “In case of an Emergency open this” letter at home. It details our game plan for surviving without an income. I’m the only bread winner in the house so we would have to cut lots of stuff from our budget quickly to try and make the emergency fund last as long as possible. In the envelope I have simple instructions like Cancel this service and that service. I also have a sample budget to use as a guide to what we really need and what can disappear.
In a job loss emergency it can be hard to prioritize cuts to the budget. Our Incase of an emergency open envelope helps us have clear heads when the time comes.
regards,
Jason
May 6, 2010 at 7:06 am
@Jason: Sounds like a very wise approach! I just may do the same.
We’re a dual income household and both make good money, so if one of us lost our jobs, we’d actually be all right (though yes, we’d have to take a good hard look at the budget and cut back significantly. That said, we’re also both in closely associated sectors (government and non-profit) so good to give some thought to what we’d do if we both lost our jobs (unlikely, but possible). We are on track to pay off all consumer debt by the end of August, leaving us with a modest mortgage and what’s left of my student loans. In case of unemployment for both of us, I could get interest relief on the student loans, leaving just the mortgage, which isn’t too bad. Neither of us has a significant emergency fund just yet though, so that’s the next priority – if something happened tomorrow, we’d have to dip into credit, and while we can certainly do that for a while, it would set us back years in our quest to become debt-free. That said, we could pay the mortgage and put food on the table until we found work again, so that basic level of security is there – I’ll sleep better once we have 6 months of expenses saved up, but I am sleeping pretty well right now
May 6, 2010 at 7:17 am
I have thought of this before. We both work and have no children, so we could survive on one of our incomes. As a teacher with a good deal of seniority it would like be my salary, unless of course I were to take sick. Long term disability should cover the expenses though. My husband’s income is more variable.
We could live on about half of what we take in, if we had to. That helps me sleep at night. We are building our emergency fund and by the summer should have about 3 months worth of expenses put away.
May 6, 2010 at 7:25 am
We’re in emergency mode as I try to find a job in teaching. We have an emergency fund and are being really careful about spending. I’ve been picking up jobs here and there so we haven’t dipped too far into our emergency fund. But it is stressful and we don’t have much entertainment to relieve the stress. I think we are going to be having a lot of picnics this spring and summer!
May 6, 2010 at 7:27 am
Good idea. I’ll be doing this soon too.
May 6, 2010 at 7:37 am
I’ve got my emergency fund to about half of where I want it to be which is 9 months of essential expenses covered in case I lose my job – with no other income supports calculated in. That way, with EI, chances are I’d get back into the job market without breaking the whole emergency fund.
I never had an emergency fund before so was really thrilled when an unexpected expensive dental procedure that was only partly covered by the work dental plan came up and I was able to pay cash without worrying whether to put it on line of credit or credit card and how quickly I could pay it down.
At first as the fund was building up I was thinking to myself, what a great vacation I could have with that….then I gave my head a shake.
May 6, 2010 at 8:33 am
What to do about the cable and cell phone companies when you’re locked into 1-3 year contracts? My cell phone plan is almost up and I was considering just going pay and talk rather than a contract, but the contract rates are cheaper. I guess in case of emergency, it would be cheaper to pay the cancellation fees out of the emergency fund to get out of the contracts.
May 6, 2010 at 8:34 am
When my husband was laid off 3yrs ago we didn’t go into panic mode. We can almost survive on my salary and he received a good severance package. We didn’t want to use the package if we didn’t have to because we wanted to roll it into his RRSPs so we wouldn’t be nailed with a giant income tax bill. Having some extra cash on hand to suppliment my income meant we could ultimately roll the whole severance package into his RRSP.
We were already living more modestly than many of our friends but there is always more that can be done in an emergency. We weren’t eating lobster and filet mignon but there was room for improvement. We totally eliminated any prepared foods, no special treats, we started paying attention to the weekly flyers and began meal planning aroud the sales. We had always packed our lunches seldom ate out, but until he found a new job we had to get serious and adopt whatever other frugal tricks we hadn’t made part of our normal routine.
In the end he started his new job 4 months later and we never touched the severance package. The whole experience turned out to be a great thing for us. After a few months of belt tightening and re-evaluating every dollar we were spending, we found we couldn’t go back to our old ways. The new habits stayed. I still meal plan weekly based on the sales and what’s already on hand. Couponing isn’t as big a deal in Canada as the US, but I do what I can when it makes sense. In those four months I gathered a lot of new recipies for the crock pot, and yes 37 ways to cook hamburger.
It’s funny, in hindsight we thought we were pretty frugal before the layoff, but there’s nothing like the loss of a salary to force you to evaluate everything you’ve been doing and realize how much more you could do.
May 6, 2010 at 9:09 am
Not to be a downer, but for people that are relying on EI, or disability benefits, or assuming that they won’t lose their jobs…
If you have children, and God forbid, should one become seriously ill, disabled, or mentally ill — which parent will take the time off? How will you afford that time off? Will your company still pay you? For how long?
Also, what if your spouse became seriously ill, and s/he had to be cared for? Same questions — will your company still pay you, and for how long?
I’ve seen this happen to people in our community. One local parent of a very sick child, actually fought for the Compassionate Care bill, and then fought for its changes, but, it’s not indefinite support, and there are certain criteria that have to be met.
Job security and seniority doesn’t exempt one’s family from terrible life events. And if you think it can’t happen to you, take a closer look at the lives of people around you — I’ve seen all of the above situations occur, and all very recently. I’ve learned a lot of life lessons by seeing their struggles — mostly, to cherish your good health, be thankful for the little and big things, and never to assume that you’re untouchable.
May no one ever face these dilemnas, but please ensure that you are looking at all possibilites while you are creating that emergency fund…
May 6, 2010 at 9:16 am
Thanks Gail. I needed someone to remind me of the importance of having an emergency fund. I’m seriously working on it.
May 6, 2010 at 9:17 am
I have had a hard time with the emergency fund. Although I am creating one, it is difficult to imagine just having an 8-month emergency fund, sitting in the bank account (even ING at 3%) and not using it for something.
Intellectually, I understand the necessity, but have had a hard time translating that into action. I do believe that I have been underfunding the emergency fund, and not allowing it to build up. I also do not have the appropriate papers in place so that everything is understood in regards to the financial matters.
I am essentially a sole-income for me and my parter (he takes care of his elderly parent majority of time, with a small part-time job to cover his expenses).
I think it is too easy to wonder, hey what if I get laid off? Because I’m still capable, cash in RSP’s, Unemployment for a few months would cover expenses.
However, this post has me revising – I am going to change my thinking to, hey what if I get hit by a ttc bus crossing the street, and am unconcious in hospital for awhile, and incapable of handling my affairs for several weeks – with long rehab ahead – did I mention I have broken both legs?
This will help me get organized better – I don’t know that I need to re-budget, we have no kids, we aren’t very extravagant (and the grocerry bill should be a lot less as I’ll be eating hosiptal food) – but I do need to make sure that there is an “emergency envelope” that I keep updated that has information listed, along with accounts, hints for passwords etc.
And a will, just in case it’s not a ttc bus, but a mack truck going way too fast for that little crossway.
Look both ways folks!
May 6, 2010 at 9:26 am
@ Kat:
Note: ING is now at 2%…sorry… but don’t think of it as “just sitting there”, because, even if you don’t use it for an emergency (and God willing, you won’t), consider it as part of your future retirement fund, which you’ll be able to enjoy tax-free, and for now, it’s peace of mind; while money can’t buy happiness, at least it can give you that
May 6, 2010 at 9:31 am
We operate with separate incomes/accounts. I am the higher of the wage earners. If I lost my job and there was no EI for me, and we had to live in the spouse’s salary, we’d not last a week. Seriously. After 25 years with a company he makes less than $14 an hour and has practically no benefits. He operates out of overdraft and has no savings.
I can’t stress enough for new couples to seriously consider if your potential significant other is a financial match to you, along with romantic, etc.
May 6, 2010 at 9:41 am
“Some categories can be eliminated completely at least in the short term. Phones, cell phones…”
Sorry, cut backs on those services? Yes. Zero phone or cell phone? NO! Keep the cheapest. Potential employers need to be able to find you for interviews!
BIG YES to EF!
May 6, 2010 at 9:41 am
I always learn something new Gail. Your advice is very much appreciated.
I also appreciate the replies by readers. Sometimes a different perspective or simple tip or trick. Thanks Jason for today’s tip! I never would have thought of an ICE (In Case of Emergency) envelope
May 6, 2010 at 10:01 am
When the stinky stuff hit the fan last year when my husband was ill, we went to our bank and dropped our mortgage payment by more than half – because that’s how much we were overpaying our mortgage… We didn’t have an emergency fund but no consumer debt either. With the short term disability from the gov’t and cutting spending by a lot we actually saved during that time (but the mortgage will take longer of course…). We dropped the cable. Reduced cell bills. Made meal plans.. etc.
Now after hubby went back to work we raised back the mortgage payments but we have built 6 months emergency… because you never know!!!
Next time if/when stuff happens we will know what to do…
May 6, 2010 at 10:42 am
I went through this exercise not too long ago – I’m the primary breadwinner but my partner doesn’t do too bad. My Efund would carry us through until I got EI and after cutting expenses – his pay and EI would be just fine for the short term.
I would have to reduce my student loan payments to the bare minimum ($50/month instead of $600/month) – and we would take on a fourth roommate (an extra $500/month). There would be other slight changes as well to the extra’s – but those would be the big ones.
May 6, 2010 at 10:50 am
ING is 2% right now? …. ugh. Anybody know where we can find comparisons for interest rates online?
My financial planner is suggesting putting my emergency fund in a money market account (under a TFSA). He says it’s very secure and extremely liquid. I would still keep $1000 in my regular bank account though. Anybody done this before? Have suggestions? Half the money there would be my emergency savings and the other half would be my planned spending savings so if it went down, i woudl just cut out some of the money from planned spending.
@ Sara: I feel you. I went to interview #10 this week. If I don’t get called today, I won’t have the job. I’ve been working 2 jobs (1 full time 1 part time) to make ends meet and my husband can’t find work as well (he’s under investigation at his normal work – accused of something he didn’t do – needless to say he no longer wants to go back even if it does clear up). My emergency fund is there but since I don’t know how long this dry spell will last, I’m trying not to use it! I’m definately burning myself out by working so much though. But at least I have the money there if we needed it
May 6, 2010 at 10:53 am
For months now, the company my husband has worked for for 12 years has been threatening to collapse. I recently made a new worksheet on our budget and labelled it “Doomsday”. I slashed anything unnecessary (home phone, internet, cable, kid and adult allowances, clothing) and cut down the grocery category. Also, because we rent, we would be able to find cheaper accommodations with a month’s notice. I went online to the CRA website and calculated what my husband would receive in EI benefits (if you make anything over 40,000 and change per year that’s the cap. The max take home per month on EI is about $1500 after taxes…yikes!).
Luckily, the day after I made that budget the company got a few months of work in. We’re good for a while, but I’m glad to be prepared for when the pink slip comes knocking.
May 6, 2010 at 11:02 am
Oh and by the way, does anybody know anything about opportunity funds? I heard some people have them in case an opportunity rises up and they want to take it.
So, for example, now that my husband is losing his job, he wants (and basically needs to) go back to school. I’ve been saving $100 a month for school since Sept but I didn’t think he’d go back for at least a couple years. So now we have like $900 saved up, which really doesn’t help that much. But we’ve been putting $250 a month into an emergency fund which has now accumulated to $6000. And so since he’s taking classes by correspondance (we will only have to pay a few classes at a time), my plan is to take money out of the emergency money to pay for his classes (and he’ll be working while he goes to school). I would’ve loved to have an “opportunity fund” to fund this. Has anybody heard of these? How much do they set aside for this?
May 6, 2010 at 11:03 am
Curious, how long did it take those of you who have 6-9 months saved in emergency funds to actually save that much money?
We’ve been saving in an emergency fund for 6 months now and have 1/2 month saved up… grows so slowly… or maybe I’m not putting enough away each month? Is there a recommended time frame (1 yr, 2 yrs, etc…) that it should take to build up that 6 month stash?
May 6, 2010 at 12:00 pm
Mimi:
“My financial planner is suggesting putting my emergency fund in a money market account (under a TFSA). He says it’s very secure and extremely liquid.”
Money market MF… very secure? Depends on your definition! It is one of the more secure MF, however MF are less secure than GIC or savings accounts that are insured by the CDIC! You have to sign off that you understand that concept… Signing off is always a sign. Money market funds are not paying that much and some worry that the units might not maintain their value if the MF companies begin to take their management fee (some companies are not collecting all their usual fees because the MM would end up in the negative).
Opportunity fund? I don’t know about that one. If you have RSPs, I think that the life long learning plan (what is it really called) allows you to ‘borrow’ $ for education. The EF is meant for food and basic shelter.
Good luck!
May 6, 2010 at 12:07 pm
Mrs. T:
To build my EF, I use
- any tax refund
- end of year portion of pay that goes to CPP/EI (budget is based on January paycheck)
- 3% of my net pay per month
- surprise $
(I have a ‘miscellaneous’ line in my budget for my oops.)
If you do not owe $, you can use the 15% intended to repay debt to build your fund faster.
I recommend to rush for the 3 months and build for the 6 months. Once you have the 6-months, use the 3% for the emergency of the year (I get one most years)!
Building it using only 3% of net would take many years to build that fund.
May 6, 2010 at 12:10 pm
Jason: I really like your In Case of Emergency letter! I have one that contains all of our personal information such as next of kin, lawyer, vet, bank etc. which is for catastrophic emergencies but I never thought about making a financial emergency action and budget plan. I guess that despite my Gail rehabilitation there is still a lot of the “reactionist” in me. No plan, just react to a situation. Which of course is always bad because you don’t think before you act. I am going to start work on one today.
May 6, 2010 at 12:13 pm
Gail: Perfect timing. This is Emergency Preparedness month and we just got the government instruction guide. Not much of a financial plan other than to take your important documents.
May 6, 2010 at 12:21 pm
Maureen:
Does the guide recommend to have cash on hand? I hate carrying cash and I am probably wrong in not keep a little stash in house. In the event of an emergency bank machine may not work (or may be out).
May 6, 2010 at 12:21 pm
Thanks for sharing Jason & Marie. You both have great good action plans.
May 6, 2010 at 12:29 pm
Another note on the EF.
Each year, I write my $ goal for the EF. My spreasheet has the current balance of my fund (some invested with a differen bank to prevent temptation), the possible sources for the year, and the goal (must be reasonable given the sources). Every year, I update that goal. Remember to celebrate reaching the goal!
May 6, 2010 at 1:28 pm
@ Kat,
Don’t forget that once you’ve reached your goal – be it 6 or 9 months’ worth of expenses stashed away – you can allocate the contributions elsewhere – other savings, travel, mortgage payments, whatever.
May 6, 2010 at 1:33 pm
@ Mimi,
Your financial planner just wants to reap his MER, that’s it. Money Market funds are good for short-term, almost always yield a predictable return, but are not tax-free (unless within a TFSA). Since they haven’t yieled anything for the past two quarters, why not put your emergency fund in a TFSA?
It’s great to get interest on everything we try and save. However, since an emergency fund should be easily accessible and not subject to financial volality (and therefore, CIDC-insured), I keep mine within a simple TFSA. We may not see 3% on those for some time yet, but at least I know that what I’ve put in is guaranteed.
May 6, 2010 at 2:04 pm
It is interesting how reassuring having an emergency fund is. Like MP, I had a not-all-covered dental emergency recently and I just wrote a cheque at the end of the afternoon in the chair. Having the mortgage paid off is also a big relief: no more bag lady fears.
May 6, 2010 at 2:38 pm
Marie: Yes they do recommend having some cash in small bills and change for pay phones. I live in the North where we often have power outages and I can tell you from experience that you absolutely have to have cash on hand because nothing else works. Usually when there is a power outage everything shut s down so you cannot even get gas or groceries in a big store but our local corner stores stay open on a cash only basis. In an evacuation type emergency you will probably be moving to safer areas but may not have access to bank machines right away.
I have small amounts of cash stashed in different locations so if we do get burgaled I hope they won’t find it all. Problem is I have a weak memory – remember most of the hidey holes but not all – so I had to send a “treasure” map to my sister so that she can remind me.
May 6, 2010 at 2:47 pm
Having cash on hand can certainly help in emergency situations. I live in Nova Scotia. A few years ago we were hit with a hurricane. This pretty much shut down our province for 2 weeks. Most of the city regained power in the first 9 days, but the rural areas really suffered. Like Maureen said, having cash for the corner store & gas was a huge help because otherwise we had no payment options.
I must work on putting some more cash aside. You just never know when you will need it. I typically don’t carry much cash and don’t think about putting it away.
May 6, 2010 at 3:33 pm
This is a great reminder for certain. I’m very curious to know how long it takes most people to save up their 6-month EF; I’m working on building mine. When I see some others state that they have their full EF, have maxed out their RRSPs and TFSAs, I’m baffled as to how they did it. This would be an interesting topic on its own, even if just as a poll.
May 6, 2010 at 3:45 pm
EF building?
Mathematically, if you assume that 70% of your take home pay is for esssentials/mandatory (arbritary # based on most long-term health insurance theoretical payout), building 6 months of that by contributing 15% of net per month requires 28 months. So if you contribute only 5%, it will take 84 months.
So it is faster if you use any extra money or get an extra job just to build it up.
I’ll admit that I always had an EF once I was fully employed after studying was done, but I typically had 1 month of net pay for quite a number of years. Now that I split my EF, cashflow, and pre-planned expenses, the goals are clear and the piurpose of each account is clear (no cheating).
May 6, 2010 at 4:07 pm
ING TAx-Free Savings Account is no more 3% it is only 2%
(
May 6, 2010 at 4:54 pm
I’ve always had an EF, since the first year I had a full time job. I was a pessimist in those early years who was afraid I might get fired (it never happened) and I put aside as much as possible just in case. I waited until after I had a 12 month EF before I started taking vacations abroad and indulging in some luxuries. Now I could go about a year without cashing in any funds. I have maxed out my RRSPs and TFSAs. It’s not hard to build up an EF if you buy what you need, not what you want, and don’t worry about “keeping up with the Jones”. Also, a lot can be saved by not using credit and not paying bank fees
May 6, 2010 at 6:18 pm
Emergency funds rock! One suggestion I have is to update your required amount each year. As the cost of living creeps up so should your emergency fund. Over the last three years my basic expenses have risen by roughly $100 month which meant the emergency fund had to go up at least $600.00 to be current.
I was in a serious car accident earlier this year and even with insurance and great benefits at work there were still unexpected expenses. Although I didn’t need to access my emergency fund, knowing it was available provided a sense of calm which allowed me to focus on recovering from my injury.
Years ago someone told me the secret with money was to “save it when you need it the least so you can spend it when you need it the most”. Great emergency fund inspiration!
May 6, 2010 at 6:45 pm
Gail I think this would be an excellent activity for a couple to do before they tie the knot.
May 6, 2010 at 8:54 pm
A great post and several fantastic responses…our family must get all over this asap. I love the idea of an envelope with instructions already laid out. I think of myself as a list girl but that really takes the cake. I’m going to start the process this week!
May 6, 2010 at 9:12 pm
Hm, interesting exercise.
Looking at the numbers, first things to go will be the vehicles, music lessons, the savings plans, charitable givings, and the outsourcing of tasks I *could* do myself if I had more time. That’s about 40% of my total spending. Also, travel, and buying big items will just have to stop. Those have come up to scary 15% in average over the last years.
Further steps would be to get rid of the TV and the gym membership, reduce food costs, buy cheaper cat food, reduce my allowances for clothes/household stuff/media/going out by half — clothes need to be kept respectable, newspapers need to be read, broken things still need replacing, and staying home all day would drive me crazy, so, half will stay. Another 12% down.
That leaves 1/3 of current expenses for necessities: Rent cannot be reduced easily — moving to a bedsit in the middle of nowhere would save less than having to keep the car would cost, and that’s before the cost of moving. Internet/phone needs to stay on because whatever the trouble is, not being reachable or able to reach people won’t make it better. Basic insurances have to stay, the cats need food, so do I, and things need to be cleaned.
Under worst-case assumptions, food and allowances can be cut further, stuff can be sold, one room might be rented out to a student. I think I might be able to go down to 30% of current, but not much further without misery.
My emergency planning is calculated to provide 40% of current income for a year (or in case of becoming permanently unable to work, forever). In theory that should work. I’d rather not find out.
May 6, 2010 at 9:21 pm
I found that saving the EF was the easy part, the thought of spending it is something I can’t bear. We have lived on one of Gails budget spreadsheets for the past 2 years and cash every month. We had a couple of setbacks in the past couple of years when my wifes company folded after 23 years (no serverance) and then she was downsized after her new company moved. We never had to touch the EF fund, we just jigged the budget a little and once the EI started all was ok. Were back on track now she’s back to work and happy as can be.
May 7, 2010 at 3:00 am
[...] to Gail V-O you are Flirtin with Disaster (to quote Molly Hatchet ) if you haven’t done an Emergency Dry-run which is a cornerstone of any plan, you need to at least attempt to walk through it to see if there [...]
May 7, 2010 at 9:29 am
@all Thanks for the heads up about ING going to 2% (I did just check my statement after I wrote it and found out but that’s alright still better than whatever the bank gives). I had signed onto ING and they have this neat thing where you can set a goal amount. Which I did, and then shock! how much per month is necessary to meet that goal. So I reworked the budget, AGAIN. LOL. Bye-bye books, hello library.
@ Sandra I must confess, I am still saving different monies into different accounts classified as savings and vacation. I should have 1 month EF saved by the time that I use the vacation money, so if something were to happen inbetweeen, I would use the vacation money as EF of course.
Will I go on vacation before I have a fully funded EF? Yes. Sorry… there’s the limit of my fiscal responsibility. If I achieve saving for something, and funding all the other items, and getting out of debt, have to enjoy the fruit of the labour so to speak. Hit me with the “are you crazy stick” — but my bf has a heart condition and said, he’d like to go on hoiday again before he dies… and that’s a little melodramatic (and I did slug him for it), because he’s fine with medication currently — but yes, let’s go while we can still enjoy and walk and do.
May 7, 2010 at 10:45 am
@ Kat,
I am too! I have different accounts for different things, it just keeps me focused. I just meant that once you”ve reached a certain milestone, you can certainly beef up the vaction pool or something else.
Building up the EF is a long process, I only started mine last year. But I’m pumped and determined to do it.
May 7, 2010 at 3:32 pm
Jason,
What a great idea, and I’m glad it was near the top of the posts or I might have missed it. As a single person I’ve always felt that while I don’t have a second income to rely on, I am more flexible than if I was part of a family unit. I can make the tough decisions more easily because I only have myself to think of.
A friend of mine in Ontario is going through a terrible time. She never worked and her husband was unexpectedly laid-off from a high paying job. If they had an “In case of emergency” letter things may have been different. Her husband has been trying to find a decent job for almost two years. They’ve gone through his severance, EI and their savings. She told me some time ago that he was so depressed and she kept encouraging him that things would get better and to keep trying. Had there been some type of written plan they could have taken action immediately – sold their house, rented, moved etc. It wouldn’t have been traumatic – just practical. Instead – he couldn’t bear the thought of seeing his family do without and she couldn’t bring herself to suggest it (lest he feel like he’d failed). Now, with all the money gone they are trying to re-locate to Alberta.
May 9, 2010 at 6:38 am
Both my husband and I have good jobs and we have an emergency fund built up in case we lost our jobs but instead of that happening my mom has gotten ill in a different province and because of our fund, I was able to fly in and take care of her. This has helped me greatly in knowing I have the money and that I don’t have to worry about finances, just my mom. Happy Mother’s Day everyone!
May 10, 2010 at 6:08 pm
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May 11, 2010 at 5:53 pm
When my husband lost his f/t job in Oct/09 (while we were on our vacation in Vegas no less!!), we were lucky that he got a pretty good severance package (better than some of the other 20+ppl that lost their jobs at the same time hubby did). We put the money in our secondary account that we cannot access with debit cards, and lived off my f/t income and his p/t income. My husband started his new f/t job on Feb. 1/10, and we had only starting skimming the surface of his severance when he got the f/t job… PHEW!! Our families do not go “all-out” at Christmas (which was a VERY good thing last year). As he was starting his new job, we found out we owed on both our Income Taxes, and the car needed some hefty repairs… but we had the Emergency Fund at our disposal, without resorting to credit cards and slipping into the black hole knows as overdraft.
Once our consolidation loan is paid off this December, the Emergency Fund will be built back up to where we feel comfortable.
May 27, 2010 at 9:07 am
I’ve been working on my emergency fund for three + years and it is now just 3 months worth of living expenses. One of the things I find frustrating is that we have had a lot of unexpected expenses crop up that we probably should have had a stash of money to take care of, but didn’t, so the money earmarked to go into the EF ended up paying for, well, emergencies. It’s lovely to have the money in cash flow to say, “Well, the car died, and this month’s EF money will cover the repair bill,” or, “You had to take three days off last week with no pay, so the EF money will cover the shortfall,” but I find it very frustrating to look at an EF of $10,000 and knowing it probably could have been $20,000 by now if I hadn’t been paying all of this other stuff!!