DEBT MOM WANTS TO KNOW: DO YOU HAVE AN EMERGENCY FUND?

What would you do if you had a minor emergency. Maybe the car has an unexpected repair, or a plumbing situation happens at the house, or an illness takes you to the doctor’s office… what would you do?

How would you cover any of those unplanned expenses?
That’s where your emergency fund could help save the day!

The first question might be, how much should I have in my emergency fund?
Most minor emergencies will probably be under a thousand dollars. So I think $1000 set aside for “just in case something happens” is a good amount to start with. From there the idea is to have at least 3 to 6 months worth of your living expenses in savings as a good back up plan.

But how do you even start an emergency fund when you’re in debt?
It’s not easy, but it starts with one little step.
First you need to have a budget spreadsheet. This is where you’ll track every little dollar. You’ll track your income, expenses and ALL spending. Every transaction has to be accounted for.
Second, you need to prioritize and pay yourself first. That means whenever you have money coming in, you save first. It’s a good habit to have. Some people might think it counterintuitive to try to save while in debt, and that’s partially true. But this isn’t a savings account, this is your emergency fund.

You might struggle with saving a thousand dollars, so set a goal of $100 to start. Find things you can cut out of your spending for a month and put all that found money into your emergency fund. It adds up quickly. That means you’ll have to find creative ways to cut out your unnecessary spending. Drive-thru orders are the first thing to go. You can make coffee and food at home for a fraction of what it costs on the road.

Once you save $100, the next goal is to save up to $500. Use the same principle of cutting out things that you can do without. Maybe that means skipping a nail appointment or hair cut, or not going out for drinks after work. Cutting out those little expenses can add up. And right now the focus is to have an emergency fund. In a few months you’ll be on the way to feeling a bit more secure with your finances.

From there, the next goal is to get the emergency fund to $1000. It might take a bit of time, but setting incremental goals will help you achieve success that you can celebrate along the way. AND you’ll be reinforcing a good financial habit.

Having an emergency fund is there to cover a true emergency expense.

Things that probably aren’t an emergency are:
Ordering take out or pizza because you don’t want to cook.
That purse that would look super cute with those shoes you hardly wear.
Concert tickets or a weekend trip that ALL your friends just decided to go on.

Honestly, having an emergency fund is there so that when something happens, that isn’t planned and on your budget, you have less stress to deal with that expense, because you have money available to cover that cost.

Of course having money in the bank while being in debt might seem wrong, but chances are if you’re in debt, it’s probably more than a thousand dollars. Maybe part of your debt was from not having an emergency fund, and you HAD to put the emergency on a credit card. For many people, once the card has a balance, that becomes an open invitation to continue to charge, because that minimum payment is easy to pay, and the instant gratification of seeping your card feels good… until the statement comes in.

So today, it’s Friday, it might even be pay day for you. $$$
Pay yourself first and start your emergency fund NOW.

Go do it, don’t wait and don’t put it off!