Things you learn after it’s too late: Building an Emergency Fund

When it comes to money, I have two goals: build wealth and pay off debt. To achieve these goals, my money is calculated down to the last dollar. You want to know what I didn’t calculate for? Coronavirus. The only other time I’ve been around for a major recession I was 16 years old. This time around, when the recession inevitably knocks on our door, I’ll be kicking myself for not planning.

They say (they being the “experts”) that you should have at least 3-6 months of living expensive in your emergency fund, yet according to the financial site MagnifyMoney, of the Americans who have savings accounts (because many don’t) the median savings is $4,960. In other words, from the 50% of Americans who do have a savings account, only 50% of those have over $4,960 in their savings, or in other, other words, about 75% of Americans have fewer than $4,960 in savings. Not only do I not have $4960.00 in my savings, but that amount would only cover my expenses for a month and a 1/2—maybe…

Let’s do some math

I make $50K a year in my regular 9-5. After taxes I make $3K a month. Unsurprisingly, I have a ridiculous amount of debt, starting with student loans. Here’s the breakdown:

Income to Debt Ratio
-Rent $1,200.00
-Car Insurance$114.00
-Car Note$200.00
-Credit Cards (Minimum payment) $137.00
-Personal Loan $344.00
-School Loans $200.00

After I deduct all my fixed expenses I’m left with $658.00 a month. Of those $658 I also pull some out for sinking funds, my Acorn account, and unexpected expenses (I’m looking at you medical bills!). So really, I’m looking at around $350-$400 a month, you know for food and gas and basic day to day survival. Not really sure where I’m suppose to pull emergency fund savings??

In the name of transparency, I am “saving money” through my 403(B) retirement plan, my Acorns investing account, my Capital One 360 CD, but none of these channels are easily accessible (which is how I like it!) and would not be quick and easy ways to get a hold of money should there be an actual emergency.

Let’s be real, I never really gave it much thought! If you think about it, my goals are focused on the future (building wealth) and on the past (paying off debt), but if I don’t start focusing on the present, any little thing could annihilate all my financial goals. This really hit home when $h*t hit the fan with this pandemic. We are at such a vulnerable time right now, whether it’s our job security or our health on the line, it’s so important to be prepared.

What Can I Do Now?

Not knowing what the future holds, I’m definitely going to take some measures to prepare for the worse. Based on the information I know so far, I plan on 1. Calling my student loan provider and halting my student loan payments. Because the Federal government announced it would freeze interest on federal student loans, you can temporarily go into emergency administrative forbearance without penalties. Doing this for at least 2 months will save me $400.00. 2. I am going to call my other loan providers for my car note and my personal loan to see what I can do to halt or lower my payments during this crisis. 3. I am going to throw that “stimulus check” right into my savings account.

The Bottom Line

I’ll never forget the 2 years my dad was unemployed during the 2008 recession. For me, planning and thinking ahead is a great was to reduce anxiety about the future. Reducing or postponing those 3 payments could help me build up a small emergency fund of $400.00- $1500.00 for the ghost of recessions to come. It also makes me feel proactive and productive during these times of uncertainty and unrest. Other things to consider are calling your credit card companies, internet provider, cell phone provider, and any other services you pay for to see how they can help. It may sound clique at this point, but we really are all in this together and I’ve found in my experience that companies are usually willing to work with you, especially during times of universal turmoil.

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