My Emergency Fund: When is enough, enough?
Sometimes I worry that I come across as a broken record on this blog, “Pay down debt, pay yourself first, think about the future!” I can just HEAR the schoolmarm nag in my voice. But if there’s one thing I can’t stress enough, it’s to have an emergency fund.
What exactly is an emergency fund?
I’ve already written about emergency funds before, so let’s list the things that an emergency fund ISN’T — It is NOT a savings account for a new tv. It’s NOT for vacation. It’s NOT for consumption purposes. It’s literally money that exists to help you deal with future loss/tragedy/mishaps. Personal finance experts generally recommend anywhere from three to six months of living expenses, some say full expenses, some estimate it based on their slashed income. Estimates vary, especially considering your family situation — rent vs own, spouses income, if you have kids, dependent family members, etc — so there’s no consensus anywhere.
In the last few years I’ve used my emergency fund for two very large emergency vet bills (the poor cat, he’s fine now!) and for first-and-last when I was forced to move before I was ready. I know some people use their emergency I’ve been fortunate enough with my career that I haven’t needed to dip in during times of unemployment.
For the last few months I’ve been very actively saving for a goal of $10,000 in my emergency fund to make sure I have enough saved after my contract ends at the end of August. But lately, now that I’m less than $3,000 from that goal, I’m wondering exactly what I’m planning for.
Sure, I’ve talked about taking some time off after my contract to get some ‘life-stuff’ done, and traveling (money which is coming out of my vacation and long-term savings), and working my part-time job and some shorter contracts to end out the year. So I’ll never actually be unemployed/income-less, I’ll always have something going on the side. I’m debt-free, super hireable, and I can really reduce expenses when need-be. So what exactly is this $10,000 FOR?
I’ve been working this over in my mind and on paper for a few weeks now, and what I THINK I’m going to do is cap-out my emergency fund at $8,000. It wa was an overly cautious goal but I’m sure I can think of a better way to put that money to good use. As for the rest, I’m going to continue the savings routine and deposit the final $2,000 equally into my planned spending and vacation savings accounts. $8,000 is more than enough for me at this time in my life, if even a bit too much. This also means I can give myself a bit of lee-way and after working really hard on this contract, I can relax and actually SPEND a bit of that money I made, knowing I’ve put myself in a great position for the future with all my hardcore savings right up until now. Then? I’ll think about what comes next.
How much do you have in your emergency fund? Do you think it’s enough?