Emergency Fund

Keep Your Emergency Fund Intact

July 22, 2018 By Twila VanLeer

Smart personal finance management always includes an emergency fund to tide you over an unexpected expense. So whether you are rebuilding after just such an emergency (medical expense, car or home repairs or other sudden cash drain) or just starting a fund, there are some practical ideas to keep you on track.

Savings is, like any other use of your income, a state of mind. The rule here is to pay yourself first. Don’t resolve to put whatever is left after expenses are met into a savings account. Make it the top priority. Developing that habit goes a long way toward helping you to resist the temptation to delay starting and maintaining a savings cache.

The amount you commit to an emergency fund is not as important as your commitment to do it faithfully. Include savings as an integral part of your family budget. Set up an automatic deposit that will put savings into your account a few days after your paycheck is deposited.

Whenever you have a little windfall – tax refund, gift, overtime pay, etc. – put it into savings. Each time you pay off a debt or receive a raise, think of savings first.

When you are job hunting, give preference to employers who can offer the best benefits such as health insurance, matching retirement savings plans or travel reimbursement. Each perk that comes with the job saves you the money it would have cost you and helps build your savings.

Put your emergency savings into a separate account. Look for an account that offers interest, if possible.

If you experience a financial emergency, of course use the money you have set aside for these occasions. Just don’t delay to begin building it again as soon as possible.

Your ultimate goal should be to have three to six months of savings as a cushion against money emergencies, including the loss of your job.

Make That Windfall Count

February 7, 2018 By Twila VanLeer

An unexpectedly large birthday gift, a cash bonus at work, a bequest from a deceased relative. You just never know when you might find yourself with $1,000 or more that isn’t committed to your current budget.

What to do with it? David Bach, New York Times bestselling author and co-founder of AE Wealth Management, has three suggestions that will make the gift more valuable than it appears on the surface. (Sure, allow yourself a little splurge, but don’t blow the whole amount.)

• Build up your rainy day fund. If you haven’t yet reached a goal of having six months’ living expenses on hand in case of a financial emergency, you can buy another $1,000 (or whatever amount) of mind’s ease. A safety net can spare you a dilemma when life takes a sharp right turn and you lose your job, have a medical emergency, car repairs – any one of those little clinkers that make life interesting. Your emergency fund will grow faster if you put it into a high-yield online savings account, or a money market account that pays reasonable interest.

• Increase your 401(k). The more you set aside in your employer-sponsored retirement account, the better. Use your windfall to increase your contribution to the retirement plan by 2 percent. Especially if your employer matches a set amount of the contribution, you’ll have a deeper cushion when you retire. A 401(k) offers significant tax advantages.

• Open a “dream account”. If you are looking into the future and seeing yourself at a Super Bowl game, signing up for grad school, traveling outside the country – you name it – a bit of unexpected money can give you a jump start. Open an investment account specifically for that dream. Commit yourself to adding to the amount regularly and before you know it, you are en route to the end point of that goal.

Emergency Savings Tips

July 7, 2016 By Twila VanLeer

Make sure you rebuild your emergency savings if you've had to use it. — Make sure you rebuild your fund if you’ve had to use it.

Using your emergency savings to pay off credit card debt may look like a good idea at first glance, but there are some things to consider, according to Jean Chatsky of Bankrate.com.

Size Of Debt

If the size of the fund meets or exceeds the amount of the debt, it may be all right, but you should then begin to rebuild the emergency cushion. Then if the emergency comes, you are still ready.

Use Fund Not Credit Card For Emergencies

Using the emergency stash is preferable to having to meet an emergency with a credit card, Chatsky says.

Rebuild Fund When Used

If for whatever reason, paying off debt or meeting an actual emergency, your cushion is depleted, start immediately to build it up again. Set a goal and faithfully infuse new funds into it. Think of three categories: minor emergencies such as small car or home repairs and health care deductibles. Major repairs and having to meet a health care max would fall into the second category. Job loss is the third unexpected calamity that might demand that you dip into the emergency fund.

Emergency Savings Calculator

The old goal of saving enough to pay expenses for six months is a rule of thumb, but you may want to assess your own situation and make an upward adjustment. HelloWallet has a calculator to guide you if you need help making an analysis. Bankrate also has an emergency savings calculator.

Automatic Transfers

If you use a calculator and the recommended savings seem beyond reach, begin with the small emergency category, then move up as you are able. Reaching small goals gives you incentive to work for a higher level. Automatic transfers from your bank account into your emergency fund is one way to alleviate some of the pain. Don’t give yourself the opportunity to spend what you intended to save. If you wait until the end of the month to cough up the emergency fund payment, it is less likely to happen.

Bottom line: An emergency account is essential to a healthy personal finance scheme. Give it some priority.

Your Emergency Savings Can Save You

March 22, 2016 By Twila VanLeer

Who plans on having roof repairs? Emergency savings can help cover these costs.

Saving part of your income on a regular basis may sometimes seem to be an unnecessary step that just deprives you of having the things you’d like now. But there are instances when a savings pad may be what saves your bacon in an emergency.

A bankrate.com survey in June 2015 discovered that 29 percent of Americans have no savings at all. They could learn from the personal stories shared by Americans who found that their savings suddenly meant all the difference to their personal finances.

Claes Bell is one of those. It happened under very ordinary circumstance, he related. Those who make Florida their home know that heavy, long-lasting rain is a reality in that part of the country. “It’s sudden and loud and so thick you can’t see much past the end of your driveway,” Bell recounted.

The Bells knew that the roof on the home they bought was 25 years old and becoming a problem, but they’d put off repairs. So when the next storm arrived, they were dismayed but not surprised to hear dripping in their bathroom and find a stain on the ceiling that let them know where the rain was getting in.

Bell tried stop-gap measures, including a sealant, but the drip kept occurring during rainstorms. It became obvious that the only real solution was a new roof. In a poor realty market, the chances for a line of credit or equity loan seemed remote. That’s when the Bells’ emergency fund became the factor that saved their finances.

“Thanks to the sluggish market for home repairs, we were able to get a deal on the roof that allowed us to just cover the cost with our emergency fund,” Bell wrote.

Using up the fund was painful, but it served the purpose for which the family established it. They were able to repair their home without incurring budget-busting debt. They were safe and comfortable, even knowing that Florida’s rains would continue to fall. Starting a new emergency fund was at the top of their priority list.

Thousands of such stories should be impetus for that huge group of Americans who continue to shun saving as a vital part of their budget. As the Bells could tell them, savings and safety are words of a feather.