Emergency Funds Explained

So today I would like to talk you about emergency funds. Guarantee that if you are following the debt free community on any level you will have heard of emergency funds. Questions I am always asked is this not the same as regular savings or sinking funds. No it isn’t and I am going to explain why now.

Emergency fund was something I really struggled to get in place. For me personally, it was one of the hardest steps in getting my budget system going. Yeap! I could track all my spending really easy, I could do the envelopes and use them successfully, I could even save for my sinking funds with no issues at all. But for some reason, I continued to fail with getting an emergency fund in place. I would manage to get it to 500 and then boom it would be gone, more than likely blown on something that was not an emergency. I suppose looking back (and honestly it is not very long ago), it was simply a case of bad habits die hard. My bad habit of money burning a hole in my pocket. I simply did not have the right mind-set with regard to my emergency fund. I was looking on it as money I could simply dip into if needed. The easy place to grab a spare 50 if va bill was short. So how did I change this? Well I had to completely change my thought process and my approach. It wasn’t easy but here is what I did.

(1) I moved it to an account which I did not use for anything else. I placed it in a credit union account which I allocated to my emergency fund only. Some like to keep it in case, however I tried this and this turned into an even bigger disaster. I kept dipping in. Although I do not have access to this account 24/7, if needs be I can go into the branch 9-5 and take it out. This works for me because I need some distance between me and my money.

(2) I hit the goal of 1000 HARD! I figured because it was taking so long to get to 1000, I was becoming completely unmotivated. So I cut everything for 6 weeks. I cut costs everywhere I could, I sold whatever I felt I could part with and I did extra shifts at work. I hustled my way to 1k in six weeks. Can I add this was the first time EVER I simply just had this amount in my account that had no purpose only as a safety net. Well this is a purpose but you know what I mean.

(3) It took work to get to this point in just six weeks and this give me a strange feeling. No not one to spend the money, but one to protect the money. I never had this before so this is why I call it strange. It had always been easy come easy go. This new feeling felt good to me. My want to spend was gone, my need to hold onto the money was strong! I felt like I had finally run the marathon. Result!

(4) Finally, as I nurtured this emergency fund it started to make me feel safe financially. For the first time I had money just there if my washing machine broke. My old mind-set was if it broke well then I could make more money to fix it but this was different. My thinking had changed. Now I could get these things fixed instantly without worrying or using the petrol station washing machine while gathering the funds (or dryer, been there!).

And that is how my mind-set changed in a more positive direction with regard to my emergency fund.