Emergency funds are awesome! I can honestly say that how well I sleep at night is effected by the balance in that account. I got it up to $2,000 pretty quickly in my early 20’s but hitting the goal of $5,000 took some time – partially because of paying off debt and partially because of raiding it.
But how do you decide it’s ok to raid your emergency fund?
Things I have raided my emergency fund for:
- Tuition Payment (bad idea)
- Relocation for a New Job
- Physicals to Start a New Job
- Car Insurance Payments (not recently, but it’s been known to happen)
I’m still not sure touching it for tuition was the best idea, mostly because I completely drained the sucker. I think if it were the difference between staying in school and dropping out AND it didn’t completely drain an account, it’s a valid reason – the problem is that there will always be another tuition payment, and what’s the plan then?
I’m a huge fan of emergency funds providing you freedom and the main thing I tap mine for is opportunity. When I decided I was going to take a much more lucrative job in New York City, I still had to pay to get there and find a place to live. Tapping my emergency fund made that whole situation possible.
Back when my emergency fund was much smaller, it allowed me to pay a few hundred dollars for the intense, insane physicals that are required to go work on a cruise ship. Since I had $400 accessible to me when I needed it, I was able to take advantage of a job opportunity that wound up letting me save thousands.
Other things I would be willing to tap my emergency fund for:
- Car Insurance Deductibles
- Health Insurance Deductibles
- Car Repairs
- A New Computer (if mine died suddenly and I had no plan)
- Travel Expenses for a Family Emergency
I would also be comfortable using it to cover living expenses if I lost my job.
How do you plan for these emergencies though?
Well, personally, my overall goal for my emergency fund is $10,000. I think this might be a little higher than the average single person needs to aim for, but I feel like if you work in the arts, you should plan for at least six months of unemployment expenses AND any health, car, home insurance deductible amounts too.
However, I can say that at a little over $5,000, I’m not losing any sleep at night, especially considering how low my expenses are lately. Interestingly enough, while living in NYC, $5,000 didn’t feel that comfortable to me and if I’d planned on staying there, I suspect my overall goal might be even higher than $10,000.
Additionally, you can plan for emergencies that you know will arise with a different account. For instance, I’m pretty certain that both my laptop and my phone are on their last legs. So I’ve started saving a little bit each month specifically to replace them.
I’ve researched the estimated life span of Toyotas and also have started a savings account to add a little each month for when I’m likely to need a new car… which is hopefully about 7 years from now.