In case of (money) emergency, break glass

Nicole and Maggie’s “where can you tap if you came up short” post was good fun.

My short answers:

Credit cards first assuming it’s under 50K and not a long term recurring expense. Pay it off with….
1. Expenses checking account.
2. Savings specifically holding money for the expenses account.
3. Emergency cash fund.
4. Several CDs.
5. Sell off stock portfolio.
6. Retirement savings.
(How short is short??)
7. Sell the property if it’s that bad.

But of course that just triggered a bunch of questions. What are we talking about when we say, short?

If I “overspent” in any given month (wedding expenses, I guess are the only thing that has recently been in this category), it’d be on the credit card. Those are paid in full with cash in my our checking account specifically meant for paying bills. We put our paychecks in there, less our automated savings, so whatever’s in there is “fair game”. Of course, when that goes above a certain amount, I skim right off the top and put it in emergency savings too so that grows a little faster than generally planned. What? I LIKE SAVINGS.

(Shoot, I LOVE savings. Like I love donuts. And I love donuts.)

I still leave a healthy amount in there (up to several thousand) because nothing in the emergency fund comes out for anything short of a medical emergency, job loss or death in the family.  At that, while we didn’t do anything extravagant so it wasn’t an unreasonable amount, Mom’s funeral was paid in full with a check the day of the arrangements. And before that, her major dental expenses went on my credit card, and was also paid off in full. So that checking account can bear up against a few strains pretty easily.

If we are talking job loss, though, that’s a different story. That’s ongoing expenses for an undetermined amount of time so I’d be looking at ways to mitigate the lack of income (unemployment income, freelancing, consulting – whatever) at the same time as tapping the emergency fund.

I spent almost a year unemployed. During that time, I worked the network HARD while freelancing and writing; back then the emergency fund wasn’t nearly as healthy but the expenses had also been trimmed back to a fare-thee-well, so the rate of withdrawal wasn’t truly atrocious. Scary, yes, because once I was tapped out, that was me AND my family on the street, but objectively, not that bad.

Our expenses now have grown: two households, two dependents, pets, long distance family to visit, etc. We CAN cut back in some ways but not a whole lot. So the list generally stays the same.

It’s both comforting to know that our savings could probably carry us at least a year based on our expenses not changing and assuming no emergencies (though c’mon, one bad turn tends to breed another), and scary to think it probably couldn’t last 2-3 years. My comfort zone lies in a much higher amount of savings.

:: Over to you! What’s your emergency money plan?

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17 thoughts on “In case of (money) emergency, break glass

    • And your savings ARE pretty substantial, definitely more so than mine :)

      I always assume (hope) I’d find a job before the first line of savings is tapped out but as I get older that WILL be harder because of age discrimination. I watched that happen with my parents, so I’m feeling rather fanatical about building a lot of savings.

  1. great post and great topic! i’ve been unemployed (well, underemployed really, since i have been doing some freelancing) for a year and am looking at possibly remaining unemployed for another year (although i’m working on being employed again). i have savings and investments but i don’t think i would really be able to weather a major financial hardship right now. still, i’m glad to know that someone else survived unemployment with their finances intact; i think being unemployed will help me be a more savvy budgeter when i do go back to work.

    • A few of us have managed to live through it intact though it was stressful. I was really lucky to finally have dug out of debt AND amassed some savings by the time I was out of a job last time, otherwise it would have been some dire straits!

      The things you learn during this period will be really useful when you go back to work.

  2. We have savings and we have college savings for our kiddo. We use credit cards in a pinch but are working very hard to pay everything with cash and pay off our current (Smallish) credit card debt. We are also gearing up to start house-savings – which will be a pretty massive endeavor and a lot of savings (at least 1500-3000/month).

    I think we’ve only used our savings once to pay for an unexpected family trip out of the country. We have never had large savings, and were not always able to set money aside monthly, but those fits and starts were mostly wedding related/unemployment related. Hopefully the largeness of our savings will change soon.

    I really try to live with the “do you we need it? If no, then we don’t get it.” attitude. Especially with large purchases (cars, buying a house sooner than we should, etc).

    • That’s a pretty good track record only having to pay for one emergency.

      I wish you all the best in growing those savings!

  3. It would take something catastrophic for me to “come up short.” I weathered a year of unemployment on savings some years ago, and I’ve built up more savings since then. Assuming that something awful happened– for example, if hackers emptied my bank and investment accounts and there was no way to fix it….

    I’m a freelancer, and I have four invoices with clients that haven’t been paid. I could wait on paying any of my current bills until those checks come it. There might be some late fees, but it would be doable. I could also explain what’s going on to the people on my current projects and see if they’d be willing to split up the payments on their things– ask the people whose projects are half-done to pay on half and the ones who are one-third done to pay on the third. It would cause a gossip storm, but I’ve worked with some of these people for years: they know me, and they know I’m reliable.

    I would probably list my house for sale, mainly because the invoiced projects plus the current projects can cover expenses for the next few months, but I can’t count on having the same amount of money coming in every month. Selling the house and renting someplace cheaper would be less of a worry and would allow me to start rebuilding my cushion again. Additionally, the housing market around here is tight right now, so I might even walk away from the deal with a profit.

    Beyond these self-reliant notions… there are people in my life that I could ask for help. I hate accepting help, though, and things would have to be pretty desperate before I got to that point.

    • That just reminds me of that episode of Bones where one of the rich characters loses his fortune due to exactly that – a hacker!!

      Curious: Do you not currently have your clients pay half in advance on contracted projects? I only ask because that’s been my experience with most freelancers on defined projects: we pay half to start and half at the finish.

      Agreed, I GUESS there might be people in my life I could borrow from but I simply could not bring myself to actually ask anyone, I don’t think. Not unless we were in truly dire straits, and even then it’d be a bitter thing to say.

      • I usually don’t have my clients pay 1/2 or 1/3 unless it’s something they want to do for their own reasons. Some of it is because my clients are middlemen, and the ultimate client doesn’t pay them until after the project is fully completed. And some of it is that I charge per project, not per hour. The way different parts of a given project can be staged, I can have one part that’s practically done while another hasn’t even started. I think it would get messy to try figuring out where that 1/2 or 1/3 point actually is, though I would if I had to. For me, though, charging upon completion works. I’ve had clients pay late, but I’ve never had anyone skip paying entirely.

        (Sorry for the late reply– I was away and not checking the web as much as usual.)

  4. 1. 3-4 months in an emergency fund
    2. Another month or so in random planned spending
    3. Another 1/2 month in TFSA
    4. Hit up the LOC

    If it was job loss I’d be eligible for EI at about $500/week… sooooo, I wouldn’t actually touch my savings because I budget $1,500 – $2,000 per month on bare bones.

    That could get me through about a year if I needed to, without EI. With EI, I’d have that for a year, then I’d move to my savings. But that being said, I’d start supplementing my income with freelance or tutoring… I’d never let myself be fully unemployed for two years.

    • It’s not the “letting yourself” part that I tend to worry about :) I watched my parents become unemployed and unemployable due to age/health issues and it was definitely not for lack of trying.

      Thank goodness for some EI to keep us afloat for a while.

  5. Pingback: Financial Emergencies…What to Do When Crap Hits the Fan | A Little Bit of Me…

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