Debt Reduction

Root canals and emergency funds

After yesterday’s entry, I realized that those who are much savvier than I am were probably thinking to themselves, “You know, Michelle wouldn’t have to lose her back tooth if she had an emergency fund.” So OK – I’m not going to lose the back tooth, that one turned out to be fine … it’s the one next to it that’s set for a root canal. Today, in fact – and all I can think to myself is “oh joy.” Closely followed by, “I’m actually taking off work for this?”

But anyway, my dental discomfort is neither here nor there. Then again, my emergency fund? Neither here or anywhere. Get Rich Slowly had an awesome guest post on emergency funds yesterday and I highly recommend taking a look at JD’s blog.

But since you are here – an emergency fund is savings that are built up to be tapped only in an emergency. Ordering takeout is not an emergency, that really awesome pair of boots at the mall – also not an emergency. When the brakes on my car were acting all wonky and I didn’t immediately have the $600 to pay Brad, my awesome mechanic? That’s when an emergency fund would have come in very handy. Today’s root canal – actually, since I’ve known about this for two weeks and have (gasp!) budgeted what my insurance isn’t going to cover from my next couple paychecks – it’s not an emergency. But it could be.

In terms of how much one should put into an emergency fund, depending where you look on the ‘net, you’re going to find a different answer. Dave Ramsey, guru of all things debt-reduction related, advises a $1,000 safety net. Once you’ve hit that goal, he encourages you to bulk up that savings to cover three months worth of expenses.

The basic idea behind an emergency fund is that if something unexpected happens, you have the money on hand to deal with the situation and ideally won’t turn to credit cards to pay your mechanic or your dentist. If you tap your emergency fund, you put that money back in as soon as you can afford to.

So why don’t I have one? I really don’t have a good answer and I will be the first to tell you that I’ve always been extraordinarily lucky. And since I am going to leave it at that and ponder what I should do next in terms of building an emergency fund, I ask you all – who out there has an emergency fund? Anyone got a magic number in terms of how much should be in it?

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6 thoughts on “Root canals and emergency funds

  1. I had a meeting once with Thrivent Lutheran Brotherhood, and it was suggested that we sit down and figure out all our expenses for 3 months and that would be the total amount of our emergency fund. This does make sense to me, if you break a bone or go on maternity leave you are looking at 6 weeks before you would be able to work. And that is only if there are no complications.

    I did not enroll in the Thrivent program, I thought that I could easily save this money myself and not have to pay any fees to them. At this time, I don’t have any money put away in terms of an emergency fund. I do have money that we stuck into CD’s for our kids that we could take if we absolutely needed to.

  2. My emergency fund goal is ten thousand which should cover about four months of bills. I currently have less because I jumped at the opportunity to open an IRA and buy cheap stocks when the market started falling.

  3. We do have an emergency fund thanks to bonuses my husband aquired. I, myself, have not contributed to it, but am thankful it’s there. It’s hard to decide…ok, should I start throwing $ into an emergency fund or pay off debt? I say, pay off the credit cards and then start putting $ away….or maybe just a LITTLE bit now.

  4. Emergency funds are easy to put off when money is tight. The money always seems to need to go somewhere else, but it really is worth getting one in place. Life is just a lot less stressful when you know you have that safety net.

    Hope the root canal went well. I hate dentists…

  5. I have about $9,000 in an emergency fund (money market account). I also have a Freedom Account (see http://www.mdmproofing.com/iym/freedom.html for the idea) that has about $3,000 in it, that I use to pay insurance, home escrow, unexpected car repairs and my son’s root canals. (He’s had 3 root canals over the past 2 years, to the tune of $700 each.) I have an automatic withdrawal of $100 a month, withdrawn from my regular checking and deposited to the money market account. And I have a payroll deduction of $90 each pay day deposited to my Freedom Account. PLUS, I add extra deposits like part of my income tax refund, etc. It’s taken a few years(!) to get to this point, but I feel more comfortable when the unexpected happens. And the unexpected does happen! My goal for the emergency account is $18,000 (6 months expenses–a past divorce changed the way I looked at my income) PLUS I want to pay cash for our next car. Long ways to go… You, however, get started…doing SOMETHING is way better than doing nothing at all… P.S. I enjoy your posts.

  6. Yes, we have an EF. It has about $10K in it. I highly recommend one…we started with about $1K when we were first married. I believe the only way we have gotten ahead financially is due in part to an EF.

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