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Thursday, January 28, 2010

Frugal Friday: Emergency Fund to the Rescue!

We've been following Dave Ramsey's plan for quite a while now. In fact, we're taking Dave's Financial Peace University course right now. We've had our baby emergency fund in place for a while... just waiting for a time like this.

This week's surgery wasn't exactly a budgeted expense around here. We only knew that it was coming about a month ahead of time. Fortunately, we have good insurance. But I was still surprised when the doctor's office said that I needed to pay $200 up front and then would owe 30% of the final procedure costs. Because we knew about the expense ahead of time, we were able to sock away extra in our emergency fund, enough that we probably won't have to touch the $1000 that's usually there.

Our emergency fund came to the rescue!

If you've never thought about having an emergency fund, or if you feel like it's unattainable, let me encourage you to start. Dave Ramsey recommends a $1000 baby emergency fund (or $500 for people who make less than $20,000 per year). That may seem like a lot, but you can do it! Even if you only put a few dollars in it each week. Maybe you can skip the drive-through for breakfast or that Starbucks drink and use that money to start your emergency fund. Maybe you can sell a few things on eBay to start it. Whatever you need to do, please start it.

The best thing about having an emergency fund is that it eliminates emergencies. Picture what would've happened if we didn't have an emergency fund. I would've been a lot more stressed about how we would pay for my surgery costs. That certainly wouldn't promote rest and healing, would it? Instead, we're able to pay the bill and go back to living life. If we have to take a little from our $1000, we can pay ourselves back as we have extra money. That sure beats paying payments to the doctor or to Visa!

Once we're completely out of debt, we'll be boosting that emergency fund to 3 to 6 months of living expenses. Stop for a minute and just picture how it would feel to have that kind of financial buffer between you and life. It's motivation to get there!

But in the meantime, I'm grateful that we planned ahead and funded our emergency fund, and I encourage you to start yours too!

For more great frugal living ideas, stop by Frugal Friday hosted by Life As MOM.


Rachel said...

It's so wonderful to have that emergency fund so when life throws you something, you have the cash to pay for it!! Best wishes with your total money makeover!! :)

Ger said...

I have been following Dave Ramsey for almost 3 yrs now. I read Total Money Makeover 2 weeks after financing a brand new van. We saved up $6100 for a down payment and that took 2 yrs to get. I read the part that Dave said something like, your car payment needs to be paid off in 18 months or less.
We followed his plan and we paid that van off in 12 months.
I have never been so thankful to have our 6 months in emergency fund. During this economic time it is nice to know that we have some "backup".

Jennifer said...

It is such a relief to know you have money in the bank to cover stuff. I hope the surgery went well.