Friday morning at 5 a.m. I received one of those heart-dropping phone calls no one wants. It was my husband calling to tell me had passed out and his head was bleeding
Here’s the thing – I work about 25 minutes from the house on a good day and couldn’t get there fast enough. He had no idea how bad his head was or even what he hit his head on (we still can’t figure it out). I told him to call 911 if the injury was that bad or to call his mom who lives just a few miles away. He decided to call his mom.
I kept him on the phone the whole way home and asked him questions over and over again. By keeping him on the phone and talking I knew he wouldn’t lay back down.
I made it home in record time and had him to the emergency room just minutes later. It was a scary ordeal walking into the house to blood on the bathroom floor, blood on the pillows (he didn’t know he hit his head and went back to sleep!) and not knowing how bad he had actually hurt himself.
An EKG, CT Scan of the head, and numerous blood tests later everything was okay. There was no underlying cause of him passing out that they could figure out and simply said he had stood up to quickly and his blood pressure dropped. Unfortunately, he didn’t make it back to the bedroom before passing out like he was trying to do.
He now has one staple in the back of his head and a nice bandage to keep the cut clean while it heals.
Why am I telling you all of this? We have an emergency fund in place. I did not have to worry about paying his co-pay at the emergency room.
Here’s the thing, regardless of how bad the injuries are, the hospital always wants their money. They will work with you if you do not insurance or unable to pay but within minutes of the nurses and doctors swarming into the room the nice lady who is in the billing department is right there too. I didn’t have to think about where the money to pay the copay would come from. We had an emergency fund in place that would cover this bill. I simply paid the co-pay and went back to my husband’s side while they ran tests.
An Emergency Will Happen
You may think you are invincible and nothing bad will ever happen to you. We use to think that way. We didn’t have savings and if something were to happen we would turn to our credit cards to pay the bill. When you do that, the bill tends to follow you around for some time after, racking up interest.
An emergency fund will give you peace of mind when things go wrong. You’ll be able to cover unexpected bills and not need to add another source of stress to your life.
5 Reasons You Need An Emergency Fund
Even when the economy is thriving, companies change their structure and let people go. It may not even be your fault but your services may no longer be needed with your company.
An emergency fund will give you time to find a new job that is a good fit for both you and the new company. You won’t have to rush into a new job and can find a job that aligns with your values.
Is it time to move on from your current company? Maybe the job no longer aligns with your values or you were offered a higher paying position elsewhere. There are many reasons people decide to change jobs.
However, when changing a job you’ll most likely have a week or two without a paycheck while you start working and you have your first payday. An emergency fund can help you fill in that cap so you do not fall behind on your bills.
Owning a home is expensive. While it is a blessing, home repairs can quickly add up. If you’ve rented for a long time you may remember calling your landlord when the faucet was leaking or the air conditioner went out. When you are a homeowner these repairs are your responsibility.
I highly recommend having a sinking fund for home repairs but if something bigger comes up you may need to tap into your emergency fund.
My story at the beginning is all about that unexpected medical expense. While I do recommend setting money aside for regular medical expenses like medication and doctors appointments, sometimes a freak accident occurs.
Medical bills can be thousands of dollars depending on your insurance policy or lack of insurance. An emergency fund can help you with copays and out of pocket expenses associated with a medical emergency.
Death in the Family
No one wants to think about a family member suddenly passing away. This is one of the hardest parts of life that we all deal with at some point or another.
If you find yourself in this situation an emergency fund can help you pay for a flight, hotel, time off of work etc. It will give you peace of mind as you navigate one of the hardest parts of life.
How to Save an Emergency Fund
Now, we all know that we need an emergency fund and that it can help us out of some difficult times. But, how exactly do you save for emergencies?
I understand money may be tight and you may have very little wiggle room in your budget to save. However, we need to find a way for you to save this money.
Set Your Emergency Fund Goal
The first thing you will want to do is have a goal for your emergency fund.
If you do not have an emergency fund in place, start with $1,000 for your starter emergency fund.
$1,000 may not seem like a lot but it is more than you currently have in your bank account. This $1,000 will help you with unexpected car repairs, a medical bill, or a short period without work. This $1,000 emergency fund is not supposed to be life-proof but it is supposed to help you get on the right track and safeguard you from Murphy.
Reduce Your Expenses
Now, you know exactly what your goal is for your emergency fund and how long it will take you to get there. Do you have enough money in your budget to actually save for your emergency fund?
If not, it may be time to take a hard look at your expenses. You probably have areas that you can cut back on such as groceries, memberships, and fun money.
I highly suggest reducing your expenses as much as possible while you build this emergency fund. Your emergency fund should be your top priority until you have at least $1,000 saved.
Add Additional Income
If you want to reach your goals even quicker or you do not have any areas of your budget that you can cut back on it is time to add additional income.
You may want to take a part-time job delivering pizzas or working at a retail store. These are both good options.
However, I think a better option would be adding a source of income from home that is flexible.
There is two work from opportunities that I think are great for anyone looking to increase their income or even replace their income. Working from home gives you the flexibility to still work a day job and take care of your family obligations without being away any additional hours. Of course, you’ll need to set time aside to work but you won’t be tied to someone else’s work hours.
The first at home opportunity I suggest is freelance work such as becoming a virtual assistant.
If you want to do something a bit different that can be scaled rather quickly I suggest running Facebook Ads for Small Businesses.
Once you have additional income coming in you will want to make sure you are budgeting your money properly.
Track Your Progress
The next thing you want to do is track your progress when building your emergency fund. I use the software You Need A Budget (YNAB) for all of my budgeting needs and have a goal set up for my emergency fund. I can tell YNAB exactly how much I want in my emergency fund by a specific date and the software will tell me how much I need to save every month. YNAB also shows me my progress toward the goal.
If you are not using a budgeting software like YNAB (but you should be!) you can track your progress manually. There are charts available or you can create your own tracker with something like Google Sheets.
An Emergency Fund will Help You Navigate the tough times.
An emergency fund will help you stand on your two feet when you feel like you have been knocked down. From a job loss to a sudden death in the family, an emergency can happen at any time to anyone. We are not immune to emergencies, no matter how much we think we are.
By reducing expenses and creating goals we can all save for a rainy day. Tracking your progress will help keep you on track and help keep you moving forward.
Once you get that $1,000 into the bank you can start to look at your goals again. Then you can evaluate what to work on next.
I highly suggest having at least 3 months in your emergency fund. This will cover you in case of a job loss or medical emergency. However, $1,000 is a great place to start while you continue to work toward debt freedom.