Friday, May 18, 2012

Emergency fund

As I mentioned in yesterday's post, David and I are working on saving money for our emergency fund.

As many of you probably know, it's generally recommended to have an emergency fund that covers three to six months of your expenses, in case something unforeseen happens, such as unemployment or a medical issue. Before we got married, David and I had savings accounts of our own, each with some money in them, but not enough to constitute a true emergency fund.

So we made a plan. We created a budget, and we did some math and figured out how much we'd need in our emergency fund. Then, to make ourselves feel a little more comfortable, we added a little extra. Once we had a final number, we tried to figure out how long it would take to save.

Our wedding was at the end of July. We decided to give ourselves just over a year--until August 1, 2012--to reach that savings. (The fund is step 1 for us. The other parts--saving for retirement and future expenses and getting out of debt--will be next.)

I'm not comfortable revealing how much we are trying to save (there are crazies out there in the world of the Internet, after all), but I will tell you some ways we've gone about it.

Oh, and in case you're wondering, "Do I really need an emergency fund? I have a little extra cash, and what's really going to happen, anyway?" my answer is yes, you definitely do need one. Odds are, nothing bad will happen (knock on wood), but you should still have some money saved up. My being laid off definitely confirmed that. We're lucky that we haven't had to dip in to it--in fact, despite being down to one income, we're still able to add to it each month--but there's a comforting feeling in knowing that money is there.

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