Ask any personal finance writer and they’ll tell you that a fully funded emergency fund is essential. They might vary in the amount of expenses they think you should have covered (the average is somewhere between 3-6 months worth), but they agree that it should be a priority after paying off debt and before embarking on other saving priorities. I’ve been reading personal finance blogs and books for years and it wasn’t until before this past Christmas that I actually opened my own and started (very meagerly) to fund it.
Unfortunately for me and the emergencies that have cropped up since the beginning of the year, the Emergency Fund has never had more than $300 in it at a time. And, as of this writing, it’s sitting below $100.00.
There have been at least three unexpected expenses in the last three months that would have benefitted from a fully stocked emergency fund.
Emergencies Come In Three’s, Apparently
The first, $1200 in surprise new brakes and callipers for my car was emergency number #1. Cars are just pesky money-pits just waiting to prey on your bank account. If I didn’t live in a city where I can’t really rely on transit, I wouldn’t own a car, period.
The second emergency was having to pay an old landlord $1100 (each) to settle an issue (and that’s all I can say about that). This one was probably the most nerve-wracking emergency of the lot.
The most recent emergency is smaller in dollar amount but more stressful to my heart. We had to pay around $500 to take care of our fur baby’s bladder infection and bladder stones. As far as pets go, our cat has been incredibly low maintenance over the last either years. But, I still wish we didn’t have to spend a terrifying two weeks wondering if she was going to make it. (Update: the fuzz is on the mend and still as adorable as ever, as my Instagram can attest to).
All of these emergencies, plus the normal bills that come with being a new homeowner (mortgage, taxes, utility bills, maintenance) has meant I’ve been feeling very strapped lately. I could have absorbed any one of these emergencies on their own, but all three have been a lot for my bank account to swallow.
Stopping the Financial Floodgates
To help close the invasive chasm between the funds coming into my bank account and those leaving, I’ve reduced my investment contributions from $500 a month to $100. But even this hasn’t been enough. Even with these expenses looming over us, our lifestyle hasn’t really changed much. And I think that’s why I’m still feeling the squeeze.
If I’m being honest, I’ve purchased one too many things for myself over the last three months as part of a mini-rebound after the end of my shopping ban. I’m attempting to counteract this by listing some of my gently used clothes and accessories on Depop & eBay.
All of these expenses has meant that I’ve been carrying $1500 and $2000 on my credit card for a couple of months. And I hate it. As far as debt goes, I was debt free for almost five years before we bought our house back in the summer and this is also my first foray into consumer debt (despite being a former shopaholic).
This post isn’t meant to be woe is me. I’m using this post as an act of transparency to help me get my act together.
Step One: My Last Resort
Step one in getting my act together will be transferring $1000 out of my investments and onto my credit card. Yes, that money is making me money. But, a 4% return from my portfolio vs. 19.6% credit card interest for carrying a balance is a no brainer. I’m grateful I have the funds at my disposal to clear 50% of my credit card debt. I know that’s not an option for everyone. However, it is something I’m doing as a last resort because I’ve realized I won’t be able to get out of this hole quickly without an infusion of cash.
Step Two: Cash Only, My Dear
Step two – going on a debit/cash/gift card only diet. My credit card is basically on fire from all the swooping I’ve been doing lately. I’m going to do the updated version of freezing my credit card in ice – keeping it out of my wallet for the time being and only using it for essentials when my debit account hits zero.
Step Three: Get that Fund Together Already
Step three – slowly rebuilding my emergency fund to a place that is less pitiful. All in time.
Emergency expenses might have gotten me into this hole. But, I’ve haven’t been doing myself any favours in trying to get out of it. That’s what I need to change.
Wish me luck.
What are your go-to strategies when you’re feeling a little squeezed in your bank account?