• Posts Tagged ‘emergency_savings’

    Emergency Fund as Self-Insurance (and Giveaway!)

    by  • November 1, 2012 • Tagged: , , ,  • Comments

    emergency fund

    Ours is locked up more securely.

    In eight years, we have been extremely lucky in that we have never had to tap into our emergency fund. As such, it’s a been a while since I’ve actively thought about it. There’s a myriad of ways that our emergency fund helps us on our path to financial security. We see it as a form of self-insurance, in that it helps us to avoid financial catastrophe should an unplanned unfortunate event happen to us. Here’s some of the ways that we’re protected.

    Income Replacement

    We’ve both been happily employed at our jobs for eight years. While we’ve both had some scares of layoffs, we’ve both been lucky and have avoided cuts. We can’t always depend on luck to keep saving us, so we’ve built up a cash cushion to replace our income should we find ourselves unemployed. This is obviously the main use of an emergency fund, but it also has other, indirect uses.

    Credit Score Protection

    By having a cash supply to fall back on, we’d be able to pay our bills on time, even if that means we pay only the minimums. Credit scores are becoming increasingly important, not only for getting good rates on home or auto loans, but also for insurance rates and even to determine whether you get a job. Even paying one bill more than 30 days past the due date can have unforgivingly deliterious effects on credit scores. It would be such a bummer for one late payment to ruin years of building good credit. (By the way, we use Credit Karma to monitor our credit score – here’s our review of Credit Karma and you can sign up for Credit Karma here!)

    Ability to Keep Moving Forward

    If one of us were to lose our jobs, we would be job searching full-throttle in order to fill the income gap. Having an emergency fund would allow us to concentrate mostly on finding a new job that suited us, and not having to get a job in the meantime in order to make ends meet. This way, we can allocate all of our efforts into finding a long-term solution for employment, which in the long run will allow us to build our financial resources even further.

    Ability to Seize Oppotunities

    Once in a while, I like to imagine that I’d come across a business opportunity that I couldn’t pass up, but would be very risky. By having an emergency fund, I’d be able to pursue (with the ok of the spouse, of course) an opportunity knowing that the financial impact would be minimized. In realty, the best opportunities that have come up so far are fantastic sales that we couldn’t pass up. Either way, having the emergency fund allows us to take advantage of opportunities while minimizing our risk.

    Peace of Mind

    The most important asset that an emergency fund brings to us is peace of mind. Just knowing that we would be able to tackle life obstacles without major financial distractions allows us to sleep much more soundly at night. We already have a lot of stress on our plates and it is a relief that we don’t have to worry about what will happen should one of us lose our jobs.

    Do you have an emergency fund? In what ways are you protected by having one?

    image: Tax Credits

    Giveaway!

    We’ve partnered up with SavingsAdvice.com to offer you the chance of winning $100 through PayPal or as an Amazon Giftcard. This is a great way to start or supplement an emergency fund. Entering is easy – all you have to do it like our Facebook Page. You can get additional entries by doing any of the other activities. That’s it! The contest is open until November 10. Good luck!

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    We’re One Step Away…

    by  • February 28, 2006 • Tagged:   • Comments

    I ran across View From the Sidewalk (via Digg) today during my morning reading. It is a blog of Michael Brown, a homeless man living in the streets of Greensboro, NC, blogging from the public library after being evicted from his home. His views are fresh and quite frank. He is what everyone does not want to become. He is what happened when life threw curveballs. From his blog:

    As the prospects for good jobs went down (by good, I mean a job that would pay me enough to catch up my bills, keep them up, and allow me to put a little away on the side to prevent financial emergencies from becoming overwhelming. In other words, just about anything above subsistence wage), my debt went up, to the point where the rent fell behind. And farther behind. And farther yet. I’d kept one or two steps ahead of the wolves as long as I could, but in January of this year, they finally caught up with me. I was taken up for eviction and my landlord wasn’t willing to work with me anymore.

    There are a multitude of articles stating that most families are only one financial catastrophe from becoming bankrupt, or worse, homeless. It would only take one of us to lose our jobs to be on the road to financial ruin, if both of us lost our jobs (heaven forbid), we would definitely be in trouble. You would never know that looking at me sitting in my office overlooking Chicago’s Millennium Park, in my Banana Republic clothes, sitting in my Herman Miller Aeron chair.

    We are playing a game. We are taking huge risks. Our emergency fund consists of a combination of our retirement funds, credit cards, our wedding fund, and the hope that we don’t both lose our jobs. We are only one financial disaster from blogging from the street.

    This is Going to Hurt

    by  • February 17, 2006 • Tagged:   • Comments

    This week we learned that this is going to be an expensive weekend. First, I found out that I’m 7,000 miles overdue to have my brakes replaced. We are going to have them repaired by a trusted mechanic rather than the dealership, so that should save us some fluff. Still, I expect the total cost to be around $500.

    Second, I learned this week that my health club membership has expired and also that my company has eliminated a program that allowed me to pay the annual fee through a bi-weekly paycheck deduction. So now I suddenly owe almost $800 for this year’s membership. This is actually a 50% reduction in price due to the negotiated corporate rate. He also is a member at this club, so I will be renewing here rather than look for a better rate elsewhere.

    The good news is that we have saved a good amount of cash in our emergency fund, so we’ll easily cover the expenses without taking on more debt. I also won a $300 award last week and am expecting a $600 tax refund soon, so I’ll be able to put back much of what we’ll be taking out. It just feels crappy to take a big hit when we’ve been doing so well lately.