Preparing for the unexpected with an emergency fund

Regardless of your current financial situation it is imperative that you have an emergency fund. Many people ask, how much should I have in my emergency fund? The answer should vary depending on your financial and personal life. If you have a steady job that you are confident in than your emergency fund should be at a minimum. However if you aren’t working and decided to attend school full time, your emergency fund should be a lot larger to avoid having to swipe that credit card. The unexpected happens every day and if you are not prepared for them, a simple fix on your vehicle could become your worst nightmare. That five hundred dollar car expense that you had to put on your credit card could become close to a thousand dollar expense before you know it with its accumulation of charges in interest. This is where the emergency fund has been so gracious to me. I can’t count how many times I have a small five hundred dollar fix that needed to be done and I just paid for it cash out of my emergency fund and didn’t have to worry much about it. I paid the money and then restored my fund back to its original amount. I didn’t have to pay any more than what was required and that’s the easiest way to save money in my opinion. If you’re always behind in owing debt to the bank how do you expect to ever get ahead?

Your living expenses shall not be confused with your emergency fund. A night out with the friends or a new television set should not be paid for out of your emergency fund. These expenses should be covered through a monthly budget plan set up for living expenses. Only you can determine what an emergency is and what is not. This is where your self-discipline comes into play and this will either put you ahead or leave you behind.

How do I start this emergency fund? The answer is simple. The easiest way for someone in college to get a large emergency fund established is to work throughout the summer or any other time you have a break in school.  Many people take the summer to continue their education and continue to study and that’s fine I’ve been there myself. It is essential that you find time either after school or before school to get a job or have a stream of income to establish the emergency fund. In my opinion it’s much more efficient to take school at a slower place to make sure you have all the funds to pay expenses out of your own pocket. Which do you prefer, finishing school with a large amount of debt and spending the first five to ten years of your career paying back the bank? Or to spend a year or two longer in school and starting your career debt free?

When I got my first job I was sixteen years old and my parents had to drive me to work every day and pick me up. I wanted a car extremely bad because I was embarrassed because I was working alongside older people. My dad told me when I was able to save up 1,000 dollars he would sell his truck to me for that price. Months later I saved up the money and showed it to him. He responded good now you can have the truck for free but you must always maintain that 1,000 dollars in case of emergencies. If you have to dip into it for emergencies you must restore it to 1,000 dollars before you can spend money on any luxuries. The lesson that he taught me is worth much more than the truck or the 1,000 dollars I saved when I was sixteen. It has put me on the path to great financial success that I’m on today.

I’m quite the conservative when it comes to preparing for emergencies. I keep well over the 1,000 dollar fund that I started with. I enjoy the feeling of not having to worry when accidents and unexpected expenses occur. This not only helps me financially with my balance sheet but also in my school and personal life. Not having to worry about how I’m going to fix my car or pay off the debts I might owe I am able to give my undivided attention to the tasks at hand.