Friday, June 19, 2009

Why you need an emergency fund.

Back to personal finance.
I seem to talk a lot about an efund but it makes sense since it's really important. A while back, I decided to cut back on my contribution to my student loans and divert some of that money to my savings account. I decided this for a couple of reasons. The number one being my realization that if I got laid off, I wouldn't even have enough to pay the next months rent. I was truly living paycheck to paycheck. Number 2 was that when big emergencies came up (or big events), I didn't have the money on hand to pay for them and then I'd have to rely on my credit card and take 2 steps back in debt reduction (i.e. $500 gas bill, $350 down to renew my car insurance). I'm proud to say that my savings account now has $40.

That won't completely cover my rent but here's why I'm proud. I had actually saved about $800. Then I had to pay for my car insurance and I was reminded I had about $300 to pay on 2 parking tickets (nyc for you) and on top of that I had to start making payments on my gas bill. All these could have sent me running for my VISA but this time around, I had the cash sitting in an account. These are precisely the reasons, I tripled my efforts towards growing my efund.

I'm not perfect, I used some of that money to by some divine shoes but at least it was a cash splurge. I'm going to keep contributing although I'll won't be able to contribute as much since I have to pay my loans again. All my outside income - ehow, surveys - are going to go to my savings account till i reach my $2000 goal.

If you don't think you could survive a month after being laid off or losing your job, you should think about building up your emergency fund even if you have a mountain load of debt.


  1. We're going to find out how well the emergency fund works out since I found out this past Monday I'm being laid off. Sadly it's an insult because my job is being sold to India to exploit cheap labor rates. I'll get a severance at least and COBRA for awhile until my wife's benefits from her new job kicks in coming in August. I don't plan to be unemployed for long.

  2. awww Jim. I'm so sorry to hear that. I really hope you find something pretty soon. Thank goodness you got a severance. It's things like that that make me really scared that I don't have some money saved up. I wish you lot's of luck

  3. Thanks for sharing such great post, according to me there are numerous reasons when we need such emergency funds. By building an emergency fund you will feel more secure because you are prepared for the facing any financial crisis.


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