Hello Emergency Fund!

Have I talked about the big emergency fund yet?  I know that I mentioned step 1 very briefly.  That particular emergency fund was a smaller amount of $1000 or so.  I also discussed step 2, which was the debt snowball.  Again, AMAZING step.  But now on to STEP 3!

Step 3 is the BIG emergency fund.  The big daddy.  It’s supposed to be 3-6 months of savings.  It’s a buffer between you and the unexpected.  It’s to keep life on track instead of throwing it way off course when the unexpected financial crisis happens.  It is said that 78% of us will have a major negative financial event in the course of a decade so the chances of you having one are pretty good. Again, this fund is for financial emergencies. These bigger emergencies would be illnesses or long hospital stays, car repairs, home repair, property repairs, asphalt paving (you’ll get that in a minute), or just plain old bill pay during job loss!  Usually it’s something unexpected.  Car registration fees do not come out of an emergency fund.  Those are something you would prepare for and budget in.  Now, you’re supposed to have this big emergency fund in place before you buy a house.  However, some people already have a house before they’ve run into the Dave Ramsey program.  That’s okay, just start the steps from the beginning and you’ll get here.

Now, you may be asking yourself…should you have a 3-month or a 6-month?  A 3-month savings is more for those with double incomes or those who have had a steady job for several years.  A 6-month savings is more for someone who is on a commission salary or who is the sole provider of the household.  You could also have the bigger fund if you have chronic illnesses that require lots of medical help.

Funds should be kept where you can get to them quickly and easily.  A regular savings account will do.  Please do not put them in something that will cost you money to withdraw from.

We were that 78% recently. We had a big storm last year and if you’ve ever been around extreme weather and asphalt, you’ll know that they’re not the best combination.  Well we have an asphalt driveway and the rain took a beating on it.  It pretty much ruined our long driveway. We’ve had huge cracks and holes in our driveway ever since.  We have tried to maneuver our way around them for much too long now and even tripped over them a few times.  It’s been bad enough that we’ve finally decided to have it repaired.  We got some bids first and then hired a company to come out and repave it.  The were a local asphalt paving company here in our area.   It cost a good $5000 or so but it’s okay because, luckily, we had put away a bit extra in our emergency fund. We’ll replenish it soon enough.  There’s still some money leftover for now.  When you’re a homeowner, you’ve got unexpected expenses!  Plan for that!  Remember…78% of us will have a major financial setback!  For those who don’t have the fund in place, they have to borrow money, and it keeps them in chains for years and years to come.  I never want to have to borrow money again in my life….not from banks, not from family, not from those cheap, scuzzy fast payday loan establishments. Please never go into one of those places.  They are for another post another day.

Moral of the story, be prepared!