Living paycheck to paycheck is tough, I’ve been there, done that. Also when a financial disaster happens, it’s no fun. How did I learn to have an emergency fund, when my mortgage company had a computer glitch and triple drafted my mortgage! This also cleared out every cent I had and caused overdraft fees galore when bills needed to be paid. Well, I called my mom bawling, and being a fan of tough love, she asked me why I had no emergency fund. She did give me a temp loan which was paid back, but not everyone can do that. I was mortified and decided never again!
I barely made any money, how would I have anything to save?!? First off, I looked at my CD (certificate of deposit money) and decided that was a start. To learn more about CD’s for savings, here is my previous post on that. Then I set my goal of $1,000 and mapped out a plan on how to get there. I decided $5 per week to start somewhere. I figured I’d use the latte factor and skip buying a drink per week and just make my own tea/coffee in the break room.
Then I had to decide the best place for my savings account to be set-up. I asked some friends and was referred to an online saving account with a decent interest rate, it was ING Direct but now it’s under Capital One 360. The nice thing about this is the account did not require me to go into a brick and mortar, the account follows me anywhere, and it’s not connected to my bills, so money will only go in. I also liked that I wasn’t watching it all the time, the super secret saving account method worked for me. They also have referral cash payments, so you send a link to someone and they start an account with a certain amount, you get a cash thank you. Pretty cool.
So I looked at ways I could cut costs per week, increasing it to $10, $15, $20 per week and making tea in the break room versus buying, packing lunches and dinners. I also worked on mostly commission, so when my quarterly commission checks came in, I’d divide it up so some went into this emergency fund savings account. If I could put the whole thing in, I would. So then I really enjoyed this savings thing, I got hooked. The more money I saved, the more interest I made. I also looked for side gigs like photo shoots etc.
Today, over 10 years later, its is still my go to emergency fund. It’s easier to take a personal loan from yourself with 0% interest than relying on high interest financial institutions. This came in handy recently.
I recently got the bad news that my HVAC was dead and couldn’t be resurrected! I knew that would eventually happen, so I saved for that VERY rainy day ahead of time with my emergency fund. This constituted as an emergency! To get it replaced was several thousand $$$$’s, I cried when I heard the amount. I also shopped around to get pricing ideas to get the best deal. Some companies were requiring me to pay it all up front, which I could’ve done…but I found a better price if I financed with a payment plan. So the less expensive replacement also had a 36 month 0% payment plan through Wells Fargo. I opted for that, made larger than necessary payments using my emergency fund until I got my next commission check. At that time, I paid the remaining balance WITHOUT INTEREST! My constant goal is to pay NO INTEREST whenever possible. Be warned, you need to watch these type of loans like a hawk, I would’ve gone with a credit union short term loan if I needed to, but was confident I’d avoid paying interest at all costs. They did try to add late fees, interest fees on if I didn’t watch carefully, but those were disputed, removed and the loan ended up interest free. It also made my credit look good by paying the loan off responsibly.
So today is the day! Start your baby steps to an emergency fund.
Here are some resources.
Step by Step Guide to emergency funds