Having three cats means having exponentially more emergencies than if we had one pet.
In addition to Trinity’s troubles, we had a car problem in the same week (and a $1,400 bill to fix it).
Having two emergencies in a week made us take a hard look at our savings place.
Saving money isn’t always our strong suit. We’re much better at spending money, something we’ve worked hard to change.
If you’re a spendy spender like us, perhaps these tips will help you save an emergency fund that’s right for your life. I strive to provide something helpful to someone, so if this was helpful, please let me know.
Tip #1: Pick a Number
As a starting point, we decided to save one year’s worth of expenses or about $30,000. Our reasoning was that if for some reason we were on temporary or long-term disability and we couldn’t work, we’d have enough money for a year to allow us time to figure out what to do next.
However, we had an emergency car repair bill and vet bills from Trinity’s emergency, so we’re considering saving more in case something else comes up. But we aren’t spending hours and hours trying to anticipate every single possible thing that could go wrong.
To kick off saving for our emergency fund, we simply started with a number that covered the expenses in our budget (with a little bit of a buffer). We fully expect that we’ll need to adjust as we go. I think we’d make ourselves crazy if we spent too much time picking the “right” number when there are too many unknowns.
Tip #2: Identify the Biggest Emergency Expense
Within reason, of course.
You may consider the ages of your home, your car, your children, and your pets and some of common emergencies that pop up for each.
Our home is two years old, so it has a two-year-old HVAC system and a lifetime roof. While we don’t anticipate any expensive repairs or emergencies for awhile, there’s always the potential for a pipe burst or clog that could mean we’d have to dip into our emergency fund. However, our biggest expense is likely to be the future HVAC system replacement, so we’ll need to adjust for that as the years go by.
Our Volvo is 11 years old and had 150,000 miles on it, so something will need to be repaired or replaced practically every year. New tires, new brakes, etc…are items we can budget for, but we can’t anticipate everything and we also count on our emergency fund. Our biggest expense is likely to be a replacement car.
Our cats are aging. Trinity was 13, Nerml is 8, and Max is 5. We budget for annual checkups, but we can’t account for every emergency. Our emergency fund number needs to consider the potential for another $2,000 bill from the vet for a surgery.
Tip #3 Sleep-at-Night Factor
If you had X number in your emergency fund, could you sleep comfortably? If not, how much would it take for you to feel comfortable with your finances?
For me, I’d like to double our savings so that $60,000 saved. A bigger cushion would mean that we’d have a our expenses covered for a year and still have enough to cover those big emergencies noted above.
For Garrett, he’s totally fine with $30,000. For him, this amount is enough for him to feel comfortable in the event of an emergency or if SHTF at work.
Personal finance is just that: personal. I don’t think there’s any “right” number or formula for everyone. In my opinion, establishing an emergency fund is a combination of money, forecasting, and psychology, so you may even consider meeting with a financial planner to help you with your plan.