Let’s talk about emergency funds!
For the most part, I’m a pretty laid-back chick; it often takes an act of God and nothing less to rattle my cage. While I do have a tendency to worry, I overcompensate by being a fierce planner. People will tell you that you can’t plan life down to the second because it’s too unpredictable. I call those people slackers. Just kidding. Of course, you can’t predict your life down to the letter, but you sure can be well versed in worse case scenario planning. Yes, things go wrong in my life everyday B, but most likely I have already created a disaster plan in the event they might.
One thing that does literally keep me up at night is my emergency fund. The idea of living paycheck to paycheck scares the shit out of me. Google the word “savings” and 9 out of 10 of the articles that pop up will tell you that you need to have three to six months of expenses in savings for an emergency. My monthly bills are about $1600 so for me, that means my savings account needs to be sitting somewhere in the neighborhood of $4800-9600. Google money trends and you will see that 9 out of 10 of those articles that come up will tell you in some fashion that as recently as November 2016, Bankrate.com found that 69% of Americans had less than $1000 in savings. 33% had nothing at all.
So where’s the disconnect?
The disconnect is that those numbers are unrealistic. I’m guessing when it comes to savings, thinking you need $5-10k is enough to deter anyone already on the fence and really discourage anyone looking for ways to save an additional $500 per month. I mean seriously, what normal 25-34-year-old has $5000 to $10,000 just lying around? Some, but not most! But that’s not to say that having an emergency fund is not an absolute necessity because it is. Working up to $5000 or $10,000 can be a really really long journey, but you can start out much smaller.
The key is starting! Begin by removing yourself from the 70% of people who spend roughly 40% more on their paydays. I imagine some of that percentage is due to monthly reoccurring payments that coincide with paydays, but certainly not all of it. Make an initial goal of retaining $50 per paycheck going into the following pay cycle. Meaning, you should be going into your next payday with at minimum $50. As you adjust to scaling back your spending, challenge yourself to tack on an additional $5-10 each month (or whatever timetable works for you).
So what if you really have no extra room to spend? How can you come up with this wallet unicorn known as excess funds?
Aww, did you think there was some get rich quick scheme coming your way? No, it will require dedication and Mr. Miagi levels of discipline on your part. It will require extreme restraint as you commit yourself to a financial convent, but I promise you that you can do it.
Just off the top of my head, I can think of two ways to come up with half of that right now…
1. Have a yard sale or sell you stuff on Letgo.com– We all have a bunch of clothes or electronics we barely every used. List those electronics on Letgo.com or sell your clothes to Plato’s closet. Raid your grandma’s attic and see if you can find any rare coins. I sold my old Juicy Couture charm bracelet to a pawn shop that specialized in costume jewelry and got $80 for it.
2. Test Websites for User Testing– User testing will deposit $10 into your PayPal account for every 20-minute video you review. It will take about 30 minutes of your time but hey a part-time job paying $20 per hour is not bad. Even better, you never had to leave your house.
The basic takeaway is that, yes you need an emergency fund, but no, we won’t judge you for having less than six months worth of expenses in it. You just need to start TODAY!