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The Evolution of Our Emergency Fund

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I think the beauty of blogs is that they help to capture a certain time frame in someone’s life. I’ve never really kept a diary in my life (too afraid my mom would find it!) so now I have something that I can go back and read about how much things have changed. One such area that has changed is our emergency fund.

Back when I started blogging, I was stubborn and nothing was going to get in the way of us paying off some debt! I couldn’t justify having an emergency fund back in April of 2006. If something came up, I planned on using our credit cards.

Seven months later, I was lured into into the online savings account arena and I deposited $100 into Virtual Bank and received a $20 bonus. I was going to stop there with our emergency fund.

Then January 2007 rolled around. We finally were able to afford health insurance and the payments were around $350/month payable every two months. That meant we had a $700 payment every two months. That’s a big chunk of our income and it was difficult to budget for at first. To help make sure we could always meet our insurance payments, I decided to increase our emergency fund balance to $350.

Just a month later, I got a little crazy. I was going to save $2,500 in our emergency fund. We got close to that goal, but a series of events depleted it to around $700.

Not too long ago, I deposited a little over $50 to our savings account to put the balance at $1,000. That is where it still is today and it will sit there until we absolutely have to use it.

Where will our emergency fund go from here?

That is a really tough choice. On one hand, I really want to reach the halfway mark with our credit card debt ($18,807). We are $893 away from reaching that mark. On the other hand, if we will be moving in the near future, we need to have some money saved up.

I think for the moment, we will not send extra money towards our debt. Instead, we will aim to increase our emergency fund to $1,500. Once that is reached, we’ll figure out where to go from there. Our emergency fund will continue to evolve.


18 Comments

  • Reply Mr. Debtbeater |

    I think our emergency fund is starting out as something that’s almost depleted every month and will eventually stablize into something that we don’t have to touch so often. I think it’s a natural reflection of your financial progression. (well, at least I hope so. cuz digging into it every month before it can grow very much sure gets frustrating)

    I agree with the decision to beef it up until you know what you’re going to do though. You’ve obviously got a proven track record with working the debt down, so give yourself a safety buffer until you know your plans for the time being.

  • Reply Melissa |

    I think you are making a wise decision. Although it may feel like you are losing ground on paying off that debt, by building up that fund you are actually enabling yourself to avoid additional debt.

  • Reply Chief Family Officer |

    I think that makes a lot of sense, particularly because you’re not accruing any interest on your credit card debit right now, if I recall correctly. If you end up not needing the money for the move, then you can apply it towards your debt and you’ll actually come out ahead (having earned interest).

    (Sorry if this posts twice. I got an error message the first time.)

  • Reply Cheryl |

    I know how hard it is to choose between throwing sxtra $$ at debt, or building the E fund, but isn’t it nice to know there is money sitting there “just in case”??

  • Reply Mar |

    Either way, you are increasing your net worth and having money on hand in case you do move is a really good thing to have. Wise decision.

  • Reply Rob in Madrid |

    If you think about what you wrote, we had an emergency fund but it got depleated. That is the whole point, you didn’t have to use credit cards. Of course idea is not to have to touch it but life has at time different ideas.

    It’s a struggle my wife and I have had as well, pay debt off or put money in the bank. And then the old stand by, how not to spend.

  • Reply Da Big D |

    If you don’t have an emergancy fund and need it, you will only go deeper into debt. I agree with what Rob in Madris said, you had it, you used it, you didn’t create debt. Good job, keep it up!

  • Reply Fabulously Broke |

    Thanks for the inspiration…

    I just recently decided to overhaul our Emergency Fund, and after clearing it with Husband (this weekend maybe?) it’s going to make me feel better in the long run to have a nice fat cushion.

  • Reply Jaye |

    I think you should follow your instincts! I know only too well that having only $1000 in an emergency fund can be very stressful.

    My husband and I used to be self-employed and health insurance (among other things) was brutally expensive. Now that you’re moving, have you thought about one of you taking a part-time job that will give your family benefits? There are companies like Starbucks that offer good benefits to its employees who work 20 hours. Not that it’s any of my business! It’s just that it helped us so much to not have to make those monthly payments. Good luck.

  • Reply Jaye |

    I think you should follow your instincts! I know only too well that having only $1000 in an emergency fund can be very stressful.

    My husband and I used to be self-employed and health insurance (among other things) was brutally expensive. Now that you’re moving, have you thought about one of you taking a part-time job that will give your family benefits? There are companies like Starbucks that offer good benefits to its employees who work 20 hours. Not that it’s any of my business! It’s just that it helped us so much to not have to make those monthly payments. Good luck.

  • Reply HS |

    It is so hard to save!! I have three savings accounts and trying to reach 1000 on each. For saving I try to set goals, like 100 this week and then I add that to the accounts.

    Money is so easy to spend, yet so hard to save.

  • Reply Jaye |

    Chris, I wondered the same thing. We were paying nearly 20K per year for our family of 5. My husband went to work for Staples, which has good benefits. Whew.

  • Reply Tricia |

    We are now paying a little over $400/month (we both passed the big 3-0 since we first started the plan so our rates increased).

    Our insurance is through Blue Cross Blue Shield of Michigan. It’s their Individual Blue program. It doesn’t cover office visits but they cover 70% of a lot of services (for example, they cover childbirth, but not prenatal care). The deductible is $2,500.

    I remember the days where my husband had a job where we didn’t pay a dime for our insurance and everything was covered 100%! But the job moved away, and we couldn’t afford to follow (I was pregnant with our son at the time). We paid for Cobra to keep the insurance going until my son was born (almost $800/month). It was worth it to keep it going because we didn’t have to pay anything for my son’s birth.

    *sigh*

    I wonder if anyone out there has insurance like that anymore.

  • Reply Mark |

    There was good article on MSN today about part-time jobs that provide health benefits. It seems like something your husband should consider if any of these businesses are in your area.

    The businesses listed included Target, Circuit City, Starbucks, Barnes & Noble, Lowes, and JCPenney.

    It could do two things, 1) increase your household income, and 2) eliminate the health insurance payment. I am not telling you what to do, just throwing out an idea that may have not been considered.

  • Reply Mark |

    Here is the link, it is long, but I don’t know how to link to it, just paste it.

    MSN Article

    [EDIT] I fixed it, Mark. Thanks again for the article!

So, what do you think ?