Given the vast amounts of information already out there, you may be asking if we really need another article on saving for an emergency fund. I worked out this week that when life happens, and the nonsense hits that fan, an emergency fund is about more than just money.
So yes, we need another one on emergency funds.
Having an emergency fund is ‘margin’, that comfortable space between you and panic or you and worry. I have worked out (the hard way as always) that setting up that initial emergency fund could be the single most important thing you can do if you want to sort out your financial situation.
Particularly if you’re a Late-Starter. Enjoy this second-last piece in the series on starting late to save for retirement.
The initial emergency fund
I am following the route of having an initial emergency fund of R15,000 to start off with. I will then attack my debt and once that is done (and yes, I will succeed) I will set up the long-term emergency fund with at least three months expenses.
For now, the initial fund is the issue. I decided on R15k based on my circumstances – you can decide what makes sense for you and your family.
This month I started that initial emergency fund and I managed to put away R2,000. I will tell you that my confidence was boosted immediately (I can do this!) and I saw the glimmer of hope.
Then life happens!
My front-gate fell off the hinges! Like really! I have barely started my saving for emergency fund and life happens.
I am understanding the importance of that emergency fund because on Friday night when I arrived home my front-gate (actually) fell off the hinges. That may not sound like an emergency but the fact is I need the gate fixed as quickly as possible. That will cost money. That money is going to come from somewhere.
Let me rewind (I so wish that I could do that!) and start my emergency fund last year. Fast-forward back to the present.
I have R15,000 in that initial emergency fund. I call a welder and I have the gate fixed. It costs R2,500 which I immediately pay and then start re-filling that fund. That is how easy it could have been (should have been).
But I didn’t start my initial emergency fund last year so I must take the cash from my income or from a credit card (don’t do it Journey-Man!) The fact is, that the money I spend on repairing that gate will come from Future-Me and I will need to have a chat with him to apologise for what I am about to do.
This isn’t just about money!
There is anxiety associated with all of this.
Present-Me is worried about where the money will come from, what the consequence of using the cash will be. Present-me is worrying that there may just be another emergency in quick succession.
The confidence that may have been built up during the knowledge-gathering and planning phase can be depleted very easily. This is definitely not just about money. When unexpected things happen and we have no margin, we can start asking some pretty depressing questions, making negative comments and thinking negative thoughts.
- This always happens!
- Just when I get started!
- Now I can’t save!
- This is never going to work!
- Why did I think I could do this now?
I think that pretty much sums up the reality. Because I don’t have an emergency fund, I will be affecting Future-Me (and his gorgeous wife and beautiful kids – I hope they don’t read this because Journey-Man will be in trouble). If you haven’t set up an emergency fund then maybe today’s the day!
What did I do?
Firstly, I decided not to use a credit card to pay for this emergency.
I had a repair job done, which cost me under R1,000, which is good enough for a month or three (that gate will hold). I paid for that from the R2,000 fund I had set up. That means I ‘m not going to get to where I wanted to this month, but I have certainly made a start and I am not going to turn back.
The main lesson though, is that before now, I would have (unconsciously) paid for a full repair with my credit card (because that’s just how we do things here!). I would have made that payment completely unaware of the real cost and the real debt I was going to incur. I think that’s already progress and I remain positive and optimistic.
So do yourself a favour (yes, I will beg) set up an initial emergency fund and set aside money for when ‘life happens’. This is about more than just money. This is about really breaking free and moving forward. Do something today!
Here are two great articles to get you started saving for emergency fund:
Keep going fellow traveller!
Until next time, this is Journey-Man
Working hard, walking hard and taking drastic action. Not just for myself, but for my kids and the next generation of Journey-Men and Journey-Women.