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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