Thursday, February 25, 2010
Emergency Fund Complete!
Today, I can finally say that I have an emergency fund! It is ready to tackle the unexpected events Life decides to throw at me. This is a big milestone for me because I have never had $1000 in savings before. I can not begin to describe the feeling of relief from stress that this brings. After reading “The Total Money Makeover” by David Ramsey on my way back from holiday vacation, I set out to take control of my finances. The first step in the book is to get an emergency fund of $1000 established. This seemed like an ass-backwards way of dealing with your debt but I read some more blogs, articles, and books that all hinted at the same thing. An emergency fund allows you to stop using a credit card and to start using cash instead. Granted my emergency fund came from the security deposit refund on my old place, but hey I’ll take what I can get.
My goal is to have two emergency funds. One will be for true emergencies such as “I need to fly home to Philly tonight because a family member was in a car accident” or “I got into a fender bender and my deductible is $500”. This emergency fund, lets call it Major, will have a balance of $1000 and will be in an online savings account by the end of the month. The second one is for mild emergencies like “I forgot to pick up a birthday gift for my niece whose birthday is this weekend” or “Its my turn to provide for the soccer team half time snacks at today’s game”. This emergency fund, called Minor, will have a balance of $500 and just be in a regular savings account at my bank.
It is difficult to define what a true emergency is and everyone has their own definitions. So thats why I have two funds. I don’t like making decisions, and by forcing myself to act a certain way my decision is made for me.
The best part about having the Major and Minor, I know that if some emergency comes up, whether big or small, I’m covered.