Posted by Victoria | Filed under Victoria
I suspect everyone reading this blog knows the importance of having an emergency fund. I certainly knew this for a while before I actually had one. My first financial goal was paying off my credit card. Once that was down to a manageable amount, I turned towards my student line of credit, but first, following Gail’s precepts, I set up an emergency fund. Just a small one: $1000 first, then I got it up, little by little, to around $1800.
My monthly costs are something closer to $1500-$1600 (without cutting things like home internet or reducing food to the bare minimum), so this was basically just one month’s worth. My target is three months. Six months would be better, of course, but as I am single and don’t have any dependents, three months will give me something of a buffer.
I’ve had occasion to use my emergency fund already. This was last fall, when I unexpectedly had to pay an extra month’s tuition. It was pro-rated because I was finishing my doctorate, but still, coming up with $1200 plus an extra plane ticket to Toronto for my defense was difficult. I was glad to have my line of credit to take some of it, but gladder still to have the cash ready in my TFSA to pay for the bulk of it. I would still be paying off some of my line of credit if I hadn’t had that emergency fun.
This came to mind this week because my grandfather passed away and I have the unexpected expense of flying to Sault Ste. Marie for his funeral. Being able to put my plane ticket (and my sister’s) on my credit card with the knowledge that I can cover most of it with my savings – before the next round of bills – is wonderful.
It will still put me back a ways in the game of saving, because I will have to save up all that amount again before I meet the three months’ target. But it’s better than having it sit on my credit card for the next few months until I can pay it off, little by little. I’d much rather be putting the snowflakes on my savings rather than my credit card. I’m learning, slowly as it may be, to use my credit card as a tool, not a crutch.