Saturday, December 12, 2009

Emergency funds & savings

When I wrote last night that I was stressed about money, it's nowhere near as stressed as I would've been feeling if I didn't have an Emergency Fund.

There's so much peace-of-mind in making sure you have money set aside - mine are set up ala the financial "guru" Dave Ramsey. I have a "baby emergency" fund of $1000 - part of it is in readily accessible cash and the rest is in a high-interest account that I can get to easily (but not too easily!). I've also got a partly-funded "Big Emergency Fund" in that same account - I'm aiming for 3 months expenses in there as the first goal. It's about 7% full - a long way to go!

So the pump breaking is classed as an emergency and will wipe out much of my "baby emergency" fund. That'll now be my first priority (above saving for the holiday *boohoo*) to get that filled back up.

The washing machine money came out of another pool of money (also in the high-interest account). I call it the long-term savings fund - I use it to save up for stuff that I know will need replacing over time (longer than 12 months). Things like the washing machine, fridge, tyres for the car, glasses for me. I've just added the sewage pump to that list as it obviously seems like it's going to be a regular expense!! It was so nice to know that the money was there to just go out and buy one.

I use a budgeting program called Simply Budgets - there are a few quirks and things that I wish that it did have, but on the whole I love it. It really helps to work out where you need your money to go (rather than working out in hindsight where it went which is what a lot of programs do). With the long term expenses, you allocate a life span for whatever it is you're saving for (eg the new washing machine I've put down as 10 years) with a replacement cost, and then it graphs to show you when you need the money and helps you work out how much you need to put aside each month to have the money at the time you need it for all of the long term expenses. The hardest thing to wrap your head around if you're used to a traditional program is that you can't track expenses in it. It's simply a forecasting tool. I've been using it for just under a year now and financially I think we're in better shape than we have been for a long time.

So while I said I was stressing about money - it was more because now I have to take away from my holiday savings to replace the emergency fund, and I don't like "living on the edge" without one! I don't have the stress of having to put it on the Credit card and wondering how on earth we'd pay for it. That's the position I would've been in this time last year..

7 comments:

Wit and Whimsy said...

I'm sorry that you're dealing with this stuff right before the holidays! But "good job, mom" for having savings! :)

jugglingpaynes said...

I know what you are going through! Our older car died on us the beginning of the month, and I know our water heater is going to need to be replaced soon. It makes it harder to enjoy the holidays when you need to start penny pinching, but at least you had that emergency fund to cushion the blow a little!

Peace and Laughter,
Cristina

Missy said...

Amen, sista!!! :) I know we've talked about this before, but did I tell you I converted a bunch of people at work to Dave's Kool-Aid, AND got to lead an FPU small group? Yeah, that man's my hero. GOOD FOR YOU for having those accounts set up!!!! :)

belinda said...

I'm sorry it happened but glad you had the resources set aside to be able to cope.

Let's just say the $600 vet bill last week means I truly feel your pain.

Good Luck and Best Wishes for the holiday season
Kind Regards
Belinda

Louise said...

Sorry that it all came at once Kez but I am so impressed with your planning and savings and am off to have a look.

libby said...

Oh dear. Not a good time to happen is it? Our washing machine died one Christmas eve a few years back. Though still frustrating, isn't it a wonderful feeling knowing you had the money to pay for the new stuff and not have to worry about how you were going to find the money. Such freedom is in having an emergency fund!
I also love simply budgets - not the perfect program but it's easy to use and gets the job done.

Libby

M.J. said...

I am a firm believer of when it rains it pours! Terrible timing with the holidays. I can commiserate though...there have been many a stressful financial strain in the past.