Life happens.

Good, bad, or indifferent, it happens.

Some real-life facts…. You can do an amazing job, or perhaps a highly competent one, and something can still happen where you are no longer working.

It can be a physical mishap. It can be a bad decision in the moment. It can be nothing that has to do with you and your choices.

This is where the Emergency Fund topic comes in.

Now, not everyone has heard about the Emergency Fund. Lots of us have. Lots of us know about it but maybe are a bit stuck with current bills and keeping up, so that it’s a little hard to tuck away money for something that hasn’t happened yet.

That last thought is a trap. Another trap is thinking, “I’ve been doing so well, I think I deserve to splurge.”

Both of these paths violate that simple thing I keep repeating here:

Spend on purpose, save on purpose.

If you want to reward yourself, figure out how much of a reward you can do, and still stay within the budget you set for yourself. Pro tip: you don’t have to spend right up to the limit. Sometimes, the right thing is less costly than you planned, and that’s not just ok, that can be a double win- get the thing and save the rest.

Saving on purpose is the pivot point here, though. Putting money away into the Emergency Fund, or the Rainy-Day Fund, or the Fridge is Gonna Blow Up Soon Fund is a way to help yourself if life breaks in and does something…less than pleasant.

So I’ve convinced you to have a fund? Great! [If I haven’t, please give the idea an honest chance.]

How much should be in there, you ask?

Again, with the great questions. Go you.

 

There are lots of people with lots of ideas on this. The theoretical ones make logical sense but maybe don’t make real life sense.

So I start with $400. It’s the amount of an unplanned emergency that 40% of us can’t deal with unless we dip into credit and pay it off over time. It’s around the cost of 2 tires on a car. [In case you haven’t’ run into this yet, you will almost never get to buy just one tire – they want to sell in pairs, so they wear evenly. It’s a safety thing…and a sales thing, but there is a safety point.]

You have a $400 Emergency Fund? Great start! Now, keep up the pace and let that fund grow. Keep kicking a little in there. The next milestone might be….one month’s salary. If you lose your job, or your job loses you, this gives a little time to take a breath and find other work.

And! Do not feel guilty if you need to use the fund. That is what it’s there for. Use it, help yourself out, and then start refilling.

Save on purpose, spend on purpose.