I believe it was the great philosopher, Scar, that offered sage advice to our generation: Be Prepared. Sure, we’re not trying to overthrow a monarchy or anything, but shit happens. Shit happens all. the. time. And nine times out of ten, it’ll be without a warning. As young, professional badasses, we need to prepare for it.
For example, in just in a 5-month span, my personal emergencies have included getting laid off, getting dumped, and my cat inexplicably losing a third of her body weight. I’d be SOL without the bit of financial cushion I keep stashing away.
Although I hear r/personalfinance singing their Emergency Funds praises just about daily, so few of my friends have any cash squirreled away for a rainy day. I was recently reminded of this when I had a date that ended in the Emergency Room. Poor guy had a kidney stone halfway through our night out. This actually happened. Is this what adult dating is like?
The point is, we never know how or when life is going to try and run us over, and it sure as hell doesn’t care about what’s convenient or affordable. I couldn’t ask my ex to hold off on dumping me until our lease was up, any more than kidney-stone-guy (as I’m sure he’s thrilled to be dubbed) could ask his body to wait until he had health insurance.
So in the interest of taking back control, here’s how I make sure I’m never without options.
1. Figure out how much life actually costs
Have I mentioned my favorite budgeting app yet? I’ve been using Mint for the past few years, and it gives me a clear idea of how much my life usually costs, assuming there are no hiccups. Every month, I know I’m consistently spending up to $3,000* on life stuff when I’m splurging on things like dating, seeing shows, and traveling.
*Over $2,400 of this is rent. Oh, to be a single renter in Los Angeles, biking distance from work… This is not my forever home.
While I can easily see how much I usually spend in any given month, it helps to know what a barebones budget would need to look like. To find this, I totaled:
- Fixed costs: Rent, cell phone service, car and renters insurance…
- Essentials: Utilities, groceries, gas, and cat supplies (she’s got to eat, too!)
I like to pad my gas budget a bit because emergencies almost always mean more driving, whether for job interviews, doctor visits, or moving. If push came to shove, I could tighten my budget by about $500. When I started saving for an emergency, I based my fund off my barebones budget, instead of my usual fairly extravagant spending.
2. Set a goal
My comfort zone is four months of wiggle room, but yours could be more or less depending on your circumstances. Personally, while I know my family would let me crash on a couch while getting back on my feet if something really got me off track, my
sanity pride would prevent me from taking them up on it. Four months is a fair amount of time to get a new job or make a life-altering decision. And if it’s not, my parents will take me in, right?
But maybe your comfort zone is closer to 6 months, or maybe you’d just need 2 months of runway. Whatever the number, multiply it by your monthly costs, and boom. There’s your goal.
3. Build the fund up
Unless you have a couple grand lying around anyway (in which case, kudos, you have an emergency fund), it’ll take time to save up. I tend to stash at least $1,000/month into a high-interest savings account until I hit my goal, and track progress in Mint each month. For bonus points, once my e-fund is built up, that money can go somewhere else (like my Robinhood) instead of being spent.
It’s important that, wherever I stash my e-fund, I have easy access to it. If my cat got sick again in a market downturn, it’d be tough to pull money out of the stock market at a loss. And having cash in your mattress isn’t going to help if your house burns down. Instead, I’ll trust an insured bank, and reap the 1%+ rewards while that money sits and waits for life to just shit all over everything.
4. Tear down, rebuild
The whole point of an emergency fund is to use the funds during emergencies. It sucks to see your perfect balance destroyed after a metaphorical (or literal) fire, but we can rebuild. We have the technology. As soon as the crisis is over and things return to normalcy, repeat step 3.
While I hope life doesn’t aggressively pelt anyone with lemons, there are no guarantees. Better to be safe than sorry, and if that means putting a couple hundred dollars a month towards the disasters that inevitably crop up, so be it. I mean, what are you going to do, not get your kidney stone taken care of? Didn’t think so.
My favorite free financial tool I use is M1 Finance. I've previously written about M1's free trades, automatic rebalancing, and easy-to-use interface, but it really does make investing accessible and easy. If you're not already investing in some way, or if you're looking for a tool that makes it easy to manage, I recommend trying it out.
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