How to start an emergency fund

Avatar for colomom99
iVillage Member
Registered: 03-28-2003
How to start an emergency fund
7
Mon, 01-18-2010 - 11:15am

I could use some advice and tips about starting a new e-fund (Dave Ramsey step #1). I think i need to start completely over in my thinking.

I plan to use a small savings account I have at ING Direct which has about $50 bucks in it and gets $10 every two weeks. The kids get $5 every two weeks. Both are automatic on the day my husband gets paid so we don't even see it. I could up the amount but I'm afraid we would feel that and end up raiding it.

I also have another savings account but typically I have used that as a draw down account since my income is so erratic. When I get one of my bigger checks I put it in there and draw down for bill payments. It's been as high as $10K and as low as zero. In the past I have thought of that as my e-fund but I now think that has been a mistake. I want a completely separate account which will be a true emergency fund. I probably could use a third savings account for some big ticket items like carpet and two of my kids want to go on class trips a year from this summer that need to be saved for. But I think I need to fund the e-account first.

Any ideas or strategies? Should I just throw money at it (a couple bucks here and there) or wait until I can make a bigger deposit? I don't want to transfer $1,000 out of the my draw down account. I'm afraid I would just run out of money for bills and then I'd use it up and be at zero again and resort to credit cards. I'm afraid I've done that in the past and think I need a totally new plan of action. Thoughts?

Jenny

iVillage Member
Registered: 09-22-1999
Mon, 01-18-2010 - 11:35am

Dear Jenny,


It all adds up, so if you can throw a few bucks in it here and there (much like snowflaking), that's great, and if you have the opportunity to make a larger deposit, do that, too.....but decide that it is just for emergencies...give it a name or something to emphasize the fact....I have the "Disaster Fund" so I don't want to touch it......


Perhaps you can write a checklist of the things that would make you spend the emrgency fund, and if in a bad moment you think you will spend it, you run thru the checklist

iVillage Member
Registered: 08-04-2008
Mon, 01-18-2010 - 12:03pm

We are going through FPU (Dave Ramsey) right now and the first step is to get that $1000 Baby EFund in place.




Avatar for colomom99
iVillage Member
Registered: 03-28-2003
Mon, 01-18-2010 - 12:09pm

Thanks. I found $5 in a pocket and will deposit that today. I guess I've always felt silly making such little deposits but you're right, every little bit helps.

I know that one emergency/disaster or whatever I call it will be my car until I can unload that sad bucket of bolts. It has 104,000 miles on it with a check engine light perpetually on and a list of "suggested" repairs as long as my arm. Because it is considered a quasi-luxury car (Passat) there is no such thing as a cheap repair. Unfortunately I bought it used in the fall of 2006 and I still owe waaay more than it's worth so I can't just get rid of it. Talk about a money drain. If I can just hold on for 18 more months until it is paid off I will trade it away so fast your head will spin.

But the strategy is to fund the e-fund first and then shovel money into cc debt? I've paid off a few smaller things this month which feels nice but I have so far to go it almost seems impossible.

iVillage Member
Registered: 08-04-2008
Mon, 01-18-2010 - 12:24pm

OOOPsss hold on there.




Avatar for colomom99
iVillage Member
Registered: 03-28-2003
Mon, 01-18-2010 - 12:26pm

I just saw your post which apparently crossed with my latest post on my car. I love the term "sinking" fund. Boy is that ever correct terminology. One question about cars. Does itmake more sense to fund a so-called car sinking fund or use that money to make bigger car payment to get the car paid off sooner?

I am so irritated with my credit union. I have been upping my car payments by about $5 to $10 every month for nearly a year. I can't swing the payment on due date so I usually go into the grace period. Last week I did a search and found they have sometimes been charging me late payments some months and not others even though I make the payment on the same day. I called and asked what the absolute drop dead day I could make a payment and they couldn't answer me (!). Then come to find out they said I missed a payment completely in Jan. 2009. It was one of those skip-a-month things where you just pay the interest. I did it to pay off some Christmas stuff but they said they have no record I made any payment. They say it has put me behind for more than a year. I am so pissed. I just want the car and the loan gone!

iVillage Member
Registered: 11-14-2008
Mon, 01-18-2010 - 1:56pm

Hello,

Some people have garage sales to get their efund started. You could flake towards it when you can until spring then have a yard sale to fully fund it.

Also some people save money from their grocery budget(spend a little less by following the sales), then take that money and add it to the efund.

Good luck with the car payments. We have 2 and a half more years to go on ours. Ugh.


iVillage Member
Registered: 07-29-2009
Mon, 01-18-2010 - 2:39pm
Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein