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Has a scary situation ever made you re-evaluate your financial goals? I ask because on Saturday, B and I went out around 7 p.m. to celebrate his birthday. After our really stressful week, I decided that we really needed to get out of the house and celebrate, so we set off for one of B’s favorite restaurants.
While we were waiting to turn off the freeway, we both watched as a car flew off the freeway, driving way too fast with no intention of slowing down, skidded around our car, narrowly missing us, before plowing into a light pole and coming to a stop in the middle of the intersection.
Amazingly, the guys in the car didn’t hit anyone else, and they were all fine. However, B and I watched the whole thing unfold in paralyzed horror and, when we talked about it later, we started going over all the things that would be affected if we got into a car accident like that.
One thing that bothered me was, hypothetically, if I ended up losing my job because of a car accident, I would need $9,000 in emergency savings for 6 months, based on my current expenses. I don’t have anywhere near $9,000 saved, which made me worried. However, the more I thought about it, the more I realized that amount was impractical. It’s not just the money that would be a problem, it would also be getting a lawyer if this car accident wasn’t my fault. There are loads I could pick from such as the San Diego car accident lawyer, but it’s just more money being spent that I can’t afford. Even though I know I would need a lawyer if this car accident ever happens.
How Much Emergency Savings Do You Really Need?
If you really get down to it, some things I spend my money on could be cut back or cut out entirely if I lost my job. What could go?
- Student loans – at least temporarily. If you’re not working, you don’t have any money for the government. Obviously not an ideal scenario, because interest would accrue, but that would shave roughly $450 from my expenses.
- Clothing and hair budget – if I lost my job, again, really? Would I need to visit the salon like I do now? No. I would buckle down, choose an easy to maintain style, and make my hair and wardrobe work. That would save me about $150 (probably less, but that’s what I budget for).
- Phone – again, if I lost my job, I wouldn’t need the phone plan we have now. I use my phone to check and respond to email when I’m not at work, and I simply wouldn’t need the data plan I have now if I weren’t doing that. Savings? $100.
Being Realistic but Cautious
Those three expenses could be cut out immediately if anything tremendously serious happened to me and I couldn’t work. That means I would need to save $4,800 for 6 months of emergency savings… but you know what? I’m still going to work to a savings of $8,000, just slightly less than the $9,000 I originally thought I ‘should’ have.
Why? Because things happen. As we all know by now, life is unpredictable and can change in a moment, from an accident in your home to an accident on the road. And even though I have insurance, and my work offers disability leave, you never know what can happen. Plus, sometimes you have to pay for things out of pocket before you get reimbursed, so it’s always good to have money in the bank.
Has a scary situation ever made you re-evaluate your financial goals, and what did you do to plan for that situation? How much do you think is necessary for your personal or family’s emergency savings?
It’s crazy scary when situations like this knock you on your feet. At least you were able to take this incident and use it to reevaluate your own emergency plan. Glad you are both ok!
Thank you! We were very lucky – which makes it even more imperative we take care of our finances NOW, in case anything crazy or unfortunate happens!
Glad you guys are ok! I havent really thought about my 3-6mo emergency fund yet, but I think I will be looking into this soon for sure!
You never know when you could need it! Not to make you worried, but just proactive about ‘just in cases’ 🙂
Oh wow, I am so glad you’re okay! Watching car accidents happen right in front of you is jolting. I always start to reflect after moments like that.
You bring up a good point. I am a fan of having a bigger emergency fund simply because I’m a total worry-wart, and I do have a “bare bones” budget that I can put into place if something serious should happen. However, I’ve been thinking about this lately as I still have my student loans to deal with, and I’m leaning more toward putting some of my savings toward them.
You bring up a really interesting point! Should money go towards savings, especially an emergency fund, or towards paying off student loan debt? I know some PF bloggers have tackled the topic, but everyone approaches it differently. I always understood that student loan debt is ‘good’ debt, in terms of credit, but some people see it as a huge burden they want to get rid of completely. I’m torn about it! I hate paying it every month, since it is so high, but like you, but a worry-wart and want to plan for every little emergency. I haven’t made up my mind yet – I’m curious to see what you will do! 🙂
Last summer, I took a much needed stress leave from my job, and this summer I’ve been unemployed, so yes… I’ve been in scary situations where I had to majorly reassess my finances!
The first thing I did was contact my student loan provider to get my monthly payment lowered (I had zero payment last summer and $85/month this summer). Then it was all about the sacrifices… no more fast food, less driving, no shopping, and very reluctantly, gave up going to the chiropractor. I still had to dip into my savings both times, but thankfully not by too much.
I should have done a better job of putting money away over this past year, knowing that my contract was going to end in April. I wasn’t anticipating being off work for 5 months, though, so I of course wasn’t prepared for the reality.
I would love to have an Emergency Fund of $10,000 – it’s just something about that extra zero that sounds so much more impressive than $9.000 🙂
P.S. Glad you’re ok! I witness a car accident a few years back where someone ran right into a light-pole, too.
Having an emergency fund of $10,000 does sound better, you’re right! I’m just so anxious to start -seriously- investing, that I want to do $9,000 and throw that ‘extra’ $1,000 into an investment of some sort… but we’ll see how I feel about that after I total up all these crazy, unexpected house expenses.
I saw you updated us on your job interview – I’m off to go read it now! I really hope it’s good news, but it sounds like you have a plan in place when you have to live bare bones. There are definitely things to cut out – it’s not pleasant, but at least we know it’s possible.
Because I would find a halt to our debt repayment plan very demotivating, I’ve opted to have large emergency funds – some in cash and some in TFSA’s. My cash amount is also around 9K, but my target savings for my bank account is 15K, because I also use this account to pay our property taxes from.
That’s a really good idea too! I’d love to work my emergency savings up to 15k, especially if it’s stashed in various places, so that maybe I could make a higher return than just keeping it my bank’s paltry interest earning savings account. Thanks for the idea! 🙂