Jan 31st, 2009
More Emergency Funding
I came home to a leaking toilet last week; I thought it might be the wax ring, but instead, after changing it, I discovered there’s actually a leak in the toilet tank. So goes more dollars out of the emergency fund.
While this doesn’t thrill me, I guess the point of the matter is I’m lucky proud to have planned well enough to have an emergency fund to draw on at all. The problem–as I’ve discussed a little while ago–is that an emergency fund doesn’t just replenish itself. So now that my fund is approaching dangerously low levels, the question becomes, “What’s the plan to build my emergency fund back up?”
Currently what I’m thinking is that I’m going to replenish 10% of what I’ve used the last four months every month–if not more–to rebuild the fund. I’m not sure how long it’ll take–recently I’ve had emergencies aplenty–but I need to get that back up to speed for the next emergency. This will require discipline and sacrifice–no more homemade 100% Kona coffee lattes in the afternoons at work for a few months–but it’ll be worth it.
When I created my emergency fund, it was the first significant savings I had done in 40 years of living. Sad, I know, but true. Anyway, another habit I developed at about the same time was budgeting. Amazingly, although I was living hand-to-mouth at the time, I discovered that I actually had a $400/month surplus. To gain access to it all that was required was to monitor my spending and cut out waste.
As I have retired debt, that surplus has increased. It is typically applied to other debt (the famous “snowball”) but when emergencies arise, I divert the surplus to emergency savings and within a few paydays my emergency savings are right back where they were pre-emergency.
If worse comes to worse, if you’re done with credit, and as a last resort, cut your credit card payments to their minimums and beyond if necessary to boost your emergency savings.
Great post. This is a topic many are struggling with, especially in these dark economic times.
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