Emergency Fund Goal: Almost There…

Early this year, I recorded a simple financial goal: by December 31st, I wanted to have $1,000 in my ING emergency fund. At the time, I had about $500 and change in the account. Now, with a little over two months left in the year (and, if you can believe it, the decade), I’m less than $75 away from my goal.

Some things I’ve learned along the way:

1.) Having an emergency fund (even a small one), really does give you some peace of mind. We all worry about our transmission conking out, a huge medical bill, or losing our income,  but we need not worry as much if we have money set aside specifically for these possibilities. Unless you are an exceptionally lucky person, these sorts of things will happen at some point in your life. We won’t know when, but we can be ready.

Many people have enough assets to cover a minor crisis or two, but for many this entails raiding a retirement account. Since this is essentially stealing from your future, and you get slammed with taxes and penalties to boot, this only adds insult to injury in an emergency-type situation.

2.) It’s also a good idea to have a miscellaneous savings account for unexpected expenses. This account can cover untimely cash outflows that aren’t exactly a full-blown disaster; speeding tickets, broken windows, or a towing bill after leaving your car in the street during a snow ordinance (guilty here). These things all suck, but they aren’t emergencies in the way that being laid off is. If a legitimate crisis is present, you will know it. Otherwise, don’t even think about touching that emergency fund.

3.) A 1.3% interest rate blows. It’s disheartening. It makes me disgusted with our drunken-sailor monetary and fiscal policies that are killing the dollar. Not too much we can do about this though; an EF needs to be extremely low-risk and liquid.

After I reach my goal, I’ll likely cut back on EF contributions, maybe putting in 1-3% of my income (vs. 5%+ now). This will allow me to focus a bit more on scaling the mountain of student-loan debt that looms before me.