Saved Again by Organizing An Emergency Fund

How are you doing on organizing your finances?  Do you have an emergency fund?

Yeah, you snort, that and a live-in butlerWouldn’t both be nice?

Let me share a real-life story about how an emergency fund helped one person, and how you can get your own.  If you read stories like this and think, this isn’t real life, let me tell you, this is very real life!

One of my organizing clients has been working on a few organizing goals for about the last year, while employed with a temp job.  A few months ago, she got serious about paying down debts and stashing an emergency fund.

We agreed she should quickly stash $2,000 in an emergency fund.  To do it, she re-allocated some extra money that she was sending to pay down a credit card account, she completely cut out spending $30 per week on clothes, and she paid more attention to her food and eating out expenses.

At first, she was worried that by diverting some of her cash into a savings account, she was hurting her other goal to pay down credit card debt.  However, when I explained that the next “crisis” would cause her to rack up more credit card debt without having some cash in reserve, she got on board.  Without a cash emergency fund, credit card debt will grow because there is no other alternative to tap when a crisis hits.


It only took her a matter of weeks to pad her hard-to-access savings account (not her regular savings account).  Then, the inevitable happened; her car broke down.  Here’s the email she sent to me:

“I have to tell you something.  My car needs major repairs.  It’s not driveable.  If you hadn’t advised me to start an emergency fund several months ago, I would not have had the money to get the repairs done.  At all.  I am extremely disappointed that I have to use up at least $660 of the $1650 I have saved thus far, with great effort, but one thing I am not is panicked — thanks to you.  This is exactly the type of emergency you wanted me to start the fund for, and your advice could not have been more timely.”

On the same day, she sent this to me, I had just paid over $700 for four new tires.  Yes, I used my credit card at the register, but I transferred the money from my emergency account over to my credit card account when I got home.  Done.  I’ve been doing this for well over a decade, and our emergency account covers these kinds of things, so financial snags aren’t really emergencies, they are just life events. I sleep a lot better now than I did in my twenties.  Marketplace Money calls this the FU fund.  Or the “See Ya” fund.  Call it whatever you want, it is how you can get ahead, too.

To get your emergency account going, follow the same strategies that my client used:

1.  Figure out if you can divert money from other obligations, like credit cards, just for a short time.

2. Find your splurges and halt them, just for a short time.

3. Part with anything valuable but unused, and sell it on CraigsList or similar.  $50 here or there can be way more valuable than a dust-catcher lurking in your basement.

4. Take a part-time gig if needed.  Tutor, mow lawns, whatever it takes to add a few bucks to your balance.

5. Monitor necessities.  Cut back on groceries, cable, cell phone service, whatever else you might normally think is non-negotiable, even just for two months.  A little here or there can get you to your $2,000 faster.

6. Stash the money in a hard-to-access account, like at an online-only bank or a credit union you don’t normally visit.

Once you have your emergency built up to $2,000, then start paying down credit card debt again.  Once that’s paid off, then you can really grow your emergency fund to cover the recommended 3-9 months of living expenses, which can really come in handy.  You see, my client lost her long-term temp job a couple of weeks ago, and she’s back to searching for full-time employment.  Uncomfortable?  Yes.  Crisis?  No, thanks to an emergency fund that was waiting for life to happen.

If you love these ideas, please read more over at Dave Ramsey’s Financial Peace site.