Comments on: A Step-By-Step Guide to Building a Big, Healthy Emergency Fund

By: Golfing Girl

Golfing Girl — Mon, 02 Nov 2009 13:56:59 +0000

5 years ago we thought we had our financial act together (good salaries, funding 401Ks at 15%, great credit, etc.) but we had ZERO savings and were only one unlucky event from disaster. We had completely ignored the savings aspect of our financial picture. Since then, we paid off a car loan, a 401K loan, and second mortgage. This freed up extra money every month and by the end of this year we will have a 6 month emergency fund. We started small in the beginning (Dave’s baby step 1 of $1000) and then started putting aside that formerly earmarked debt money into savings and never missed it.

This savings has allowed me the freedom to choose when to go back to work after having our 2nd child. There was no choice with the 1st child, so this savings cushion is quite liberating!

By: Heather

Heather — Fri, 21 Aug 2009 12:19:47 +0000

I’ve been following this blog for over a year and a half and have been debt free for seven months. In that time I have established a good-sized emergency fund. I just had to take my car in and instead of the $400 bill I was expecting, it turned out to be $800. Let me tell you the feeling that I had when the mechanic told me how much it would be…peace. My feeling was peace-I knew that I had the money to cover it and I didn’t have agonize over where I would scrimp and cut and what I would have to do without. I am just waiting for my next paycheck to repay some of that emergency money. So I just wanted to say thanks for the peace Trent.

By: kev

kev — Fri, 10 Jul 2009 15:12:22 +0000

Hey Trent,
Do any of your banks in the States have any programs like this http://www.scotiabank.com/BankTheRest ?

And what is your opinion on this kind of thing?

(Sorry about the video lady, it’s a lot of messing around to show me something I could see better in a static chart.)

By: Do You Dave Ramsey?

Do You Dave Ramsey? — Sat, 07 Mar 2009 17:43:53 +0000

You’re so right Trent… a multiple month emergency fund can become a huge and daunting target. But unlike a debt which has a defined total, an emergency fund can so easily be broken down into parts…

I say continue the snowball momentum until a 2 or 3 month fund is in place and then automate payments into the fund, as you suggest. Before you know it, you’ll have a solid 6 or 8 month fund locked and loaded!

Thanks!
Dave

By: Terry

Terry — Fri, 06 Mar 2009 04:02:33 +0000

Todd,

I can tell you from personal experience that
the FIRST bill the hospital sends you is probably
WRONG. It reflects only the insurance they have
collected up to the point the bill was sent to you.

Try to contact your insurance company and see
if they have received everything from the
hospital. Ask if they are going to cover more
than that first bill shows especially if it
includes items the insurance company hasn’t
seen.

Once the hospital establishes it’s final
non-insurance amount that you owe, you
should be able to set up a payment plan.
Ask the billing clerk at the hospital very
politely if she or he can do that.

In my own experience the hospital was quite
willing to do so and the monthly amount they
requested was reasonable and they DIDN’T
ASK FOR INTEREST.

This was at our local ‘for profit’ hospital
so, unfortunately, your milage may vary. But
I think these days hospitals are happy to
get ANYTHING more than the insurance reimbursement
so they may be quite happy to work with you.

Good luck!

By: mona

mona — Fri, 06 Mar 2009 03:03:23 +0000

The thought of saving 6-8 months of living expenses was too daunting for me too. So I checked to see how much unemployment I would get and estimated the difference in my living expenses – and saved the 6-8 months difference – and now I am working on the total 6-8 months – knowing that I can make it with unemployment as a back-up. Anyway that helped me.

By: Ryan

Ryan — Fri, 06 Mar 2009 02:57:43 +0000

I need some help. I’m single, work at a college and live in the dorms with the students. I don’t pay rent, utilities, and I don’t drive to work. (You might think this is ideal, but I also get calls and have to dump alcohol out and have 17 year olds yell at me. BONUS.)

Emergency funds are usually calculated for married people. Where can I find info about single people. Right now, I’m REALLY close to having a $10,000 emergency fund. Is that enough? I have no debt and hardly any expenses. What is the ideal amount?

By: Sara

Sara — Wed, 04 Mar 2009 20:02:46 +0000

I don’t have an emergency fund, per se. But I do have a savings account that I try to put 4% of my gross pay into. I use that for vacations, primarily, but I will pull money out for an emergency. It’s not that I don’t want to build an emergency fund, it’s that I need to have a little fun and between student loans and paying off my credit card, I can’t squeeze anything else out of my budget. I plan on paying money that I’m currently putting on the credit card into an emergency fund once I get it paid off, or at least down to 30% of it’s credit limit (currently around 50%). Is this a smart move, or should I not pay extra on the CC and put that extra in an emergency fund?

By: Terri

Terri — Wed, 04 Mar 2009 19:49:55 +0000

What about when you have college-age children & are trying to maximize the amount of financial assistance you qualify for? That three to eight month emergency fund looks like just another savings account to FAFSA.

By: Charlotte

Charlotte — Wed, 04 Mar 2009 16:16:27 +0000

No one has mentioned getting a part-time job to built extra funds. I have always had fairly low-income jobs and have frequently worked part-time jobs — and saved ALL of that money. I am now retired and still have very limited income, but I have NO mortgage (nor rent), NO car payment, and NO CC bills. I can live comfortably for years with no income now. I don’t do without anything, and I can travel. With a little self-discipline, anyone can do it. Go back and read some of Trent’s money saving hints. No one of them will add up to much, but, together, they will make a big difference. Believe me, financial peace of mind is a nice thing to have.

By: Ben

Ben — Wed, 04 Mar 2009 15:36:36 +0000

We just had our emergancy fund pay off for us last month. Our furnace went out and without our fund we would have had to finance the whole thing at a horrible rate. Now we’re focusing on building it back up. If it weren’t for the Simple Dollar we would have never been prepared for just this type of emergancy.

By: TL

TL — Wed, 04 Mar 2009 08:41:54 +0000

I’m another fan of the “little emergency” fund and the “long term” fund. My small account has about $1000 in it, and is at the same bank as my checking account. I’ll pull unexpected dr. copays, appliance repairs, etc. out of this account. If I take $200 out of this account, I have to “find”$200 from my regular bills to replace this money. Maybe I’ll stay in one weekend, or pass up a dinner out. Slowly I’ll replace the money in the little emergency fund so that money is there next time I need it.
Every paycheck I am contributing to my “long term” fund. This comes out of my checking account automatically, whether the car needs a repair, the dog has an emergency vet visit, whatever. Remember, all those minor emergencies are taken care of with the little fund, giving the long-term fund sufficient room to grow.

By: mb

mb — Wed, 04 Mar 2009 02:19:06 +0000

for anyone with a low income… nickle and dime yourself. collect loose change and small bills, any small amount of money you can and toss it into a savings account. $0.50 a day, everyday. give it a few years and it will add up to a good amount. i built my e-fund this way, and i have 5 months expenses built up.

By: Jennifer

Jennifer — Wed, 04 Mar 2009 00:54:18 +0000

I agree about starting small. We started with $1000, baby step #1 following Dave Ramsey’s plan. it was an amazing feeling to have $1000 in the bank (actually to have any money in the bank) that wasn’t already earmarked for something. Money just sitting there for no reason – it really took a lot of stress off of us.

After awhile I felt comfortable with the $1000 and assured that I wasn’t just going to blow it on some big ticket item and we decided to up it to $2000. You see, with 6 people emergencies typically cost $1000 or more it seemed, so we were more comfortable with $2000.

Then we decided to boost our emergency fund to cover 1 months expenses and then 2 and then 3. We don’t have it fully funded up to the 3 months yet, but taking it in small steps has helped us to adjust mentally to having so much (to us) money in the bank and not feeling like we could spend freely because of the cushion.

By: Matt

Matt — Wed, 04 Mar 2009 00:48:53 +0000

This is a great post. An emergency fund is the BASIS of any financial plan. It allows the plan to run smoothly and without interruption.

More people should focus on this. Without it, any move towards investing or getting out of debt will always be thwarted by emergencies.

By: Medgar

Medgar — Tue, 03 Mar 2009 22:27:30 +0000

I was in this situation about a year ago. If you take a step back and look at your situation you will find almost $1000.00 in six months.

I was broke and in debt but still had cable, still had netflix, still had cell phone, still paid long distance on landline.

Stopped cable or satellite saved $80/month
Stopped netflix $10/month
Lowered cell phone bill to min. and didn’t talk while driving or talk for no reason $60/month
Made long distance phone calls on cell phone after nine (Free) $25/month

$175/month x 6months $1050.

What is funny now I have a 8 month emergency fund and don’t miss any of the things I got rid of.

The first step is the hardest,
Medgar

By: Beth

Beth — Tue, 03 Mar 2009 21:57:21 +0000

DB Cooper- I didn’t think anyone handled money quite like I do until I read your comment. I too have several accounts…7 and counting. I use one for an emergency fund from job loss, health — basically big ticket items. Then I have a car maintenance and home maintenance fund. I also have a few “spending” accounts like Christmas and vacations. When people find this out, the most popular reaction is of shock. But it really works for my husband and I. I know when something happens I probably have it covered! And yes DB Cooper my husband, my neighbor and my father receive bonus’ (3 different fields as well). Our emergency fund was created uniquely since we used all the “gift money” from our wedding reception to fund it. I felt it was the best way to “spend” the money, was to give us financial peace of mind. The rest of the funds I treat like a normal bill like our cell phones and such, I transfer x amount at the beginning of each pay period and whatever is not used that year will roll over into the next. The next fund I am currently creating is my I want to buy my next car in cash fund, we just paid off my car last Friday!! So I am going to set aside that monthly car payment into my cash for car fund! Good luck to anyone who is starting out, once you get towards the comfort zone you can start saving for sunny day funds and that is a lot more fun!!!

By: MK

MK — Tue, 03 Mar 2009 19:30:32 +0000

Like the OP from response #5 I also have a multitude of savings accounts that I have automatically withdrawn from my brick and mortar bank on a bi-weekly basis. Small amounts for each, but a pretty substantial amount total. It does make it a lot easier to have that money earmarked for certain things. I feel less of an urge to use that money on something that it isn’t already designated for.
Another thing I have started doing though, in an effort to build up my EF to my goal amount at a fast pace is by rolling over my remaining balance in my brick and mortar bank at the end of each month into my EF. What I mean by this is once all bills are paid for the month, from my biweekly paychecks if there is anything left over for the month I take that total amount and roll most of it right into my EF. Some of it is disbursed into the other savings accounts but the majority goes right to that EF. I find this particularly helpful because some months I do go over my spending limits, so it’s nice to have the cushion in my brick and mortar account that I use to pay for monthly expenses. So, pretty much at the beginning of each month I start from zero in my bank account and have to make sure the expenses aren’t more than my income. Just my little way of keeping myself in check while saving a substantial amount of money! Because otherwise I’d see my brick and mortar bank account with an extra 200 dollars in it and think “shopping spree!”

Just an idea!

By: Karen

Karen — Tue, 03 Mar 2009 19:14:40 +0000

A solid emergency fund=a good night’s sleep : )

By: Mona

Mona — Tue, 03 Mar 2009 19:00:22 +0000

I am also in the process of building my emergency fund. I had started last year and ended up using it for a down-payment on my home. I know, not what it was set up for, but I was glad that I had gotten into the habit of saving.

A couple of strategies that I use to save more:

1. I recently opened an online savings acct as well. Mine is through SmartyPig. I did this to foster the “habit” of saving.

2. When I have extra money, I pay my bills up ahead at least a month. This “savings” doesn’t necessarily accrue interest… but rather it awards me with “breathing room”.

3. When I feel the need to splurge (reward myself for all my hard work), I will sometimes throw money that I would have spent on a night out into my saving as my reward, then stay home watch a movie on Hulu.