Category Archives: Personal Finance

How Do I Set up an Emergency Fund?

This is the second post in the series on emergency funds.  The previous post can be found here: What’s an Emergency Fund?

After one decides that they need an emergency fund, and hopefully you agree that you do, the next step is actually setting one up.  This is different than setting up a 401k, 529 Plan or IRA because there’s no real thing or product called ’emergency fund’ – it’s just a concept.   In theory you could put all your money in an old sock and it could be your emergency fund.  Or you could simply mentally set aside money in an account you already have and say “I will not touch this $XX unless it’s an emergency”.   But, while we’re here we might as well focus on what would be the ideal and forget about the old sock.

There are a few requirements for a good emergency fund:

It should be safe – The money you put in must be there when you need to take it out.   This rules out the old sock, drawer or freezer.  Even a safe in your home doesn’t suffice.  Why?  Because these things can be stolen, misplaced, lost or burned up in a fire.  Better it should be somewhere very secure and insured against whatever may happen.

This is the level of excitement we’re looking for

It should not go down in value, but grow safely – You do not want to put this money into any sort of investment that carries risk.  The last thing you want is Continue reading

What’s an Emergency Fund?

If you’ve spent much time reading personal finance literature and websites, or watched a couple of episodes of any of the modern day television gurus on the subject, you’ve probably run into the term ’emergency fund’.  If you’ve had an questions on what an emergency fund is, why you need one, how to set one up, or anything else, this series is for you.

The term ’emergency fund’ itself is a relatively new one.  Not too long ago, if someone had any money left over at the end of the month this went into an account (or cookie jar) simply called ‘savings’ or maybe ‘rainy day fund’.

Wait.  I thought the pig was the umbrella...
Wait. I thought the pig was the umbrella…

The idea of the emergency fund is to portion off some of your savings specifically for some unforeseen future emergency.  This money would be kept fully separate from savings you might use for other goals like going on a trip, buying a house, or retirement.  Ideally it would be kept in a separate account or even a different bank just to further remove the temptation to use it for anything other than emergencies.

What qualifies as an emergency?

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Credit Repair: There and Back Again

Like many folks out there I spent a good amount of my time at college doing two things; drinking and racking up debts.  I previously detailed how in my mind a single purchase started me down this dark path in the post Bad Spending: How a Single Purchase can Ruin Everything.

By the time I was 22 I was in a lot of debt with no clear way to pay it back.  I fell behind… way behind.  I would get calls early in the morning and late in the evening about these debts.  It was a mess.

"See here?    That's where you ruined your life."
“See here? That’s where you ruined your life.”

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