An emergency fund is essential to living on a budget! But they are two separate things right?
If you’ve created a budget that you can live by and it’s allowing you to still eat out occasionally AND pay off debt quickly, an emergency can derail it in a heartbeat – if you don’t have an emergency fund.
- We drive cars – they break down
- We have pets – they need to go to the vet
- We have homes – repairs need to be done
- We have kids – there will be broken bones
Most of us are including in our budgets categories to add money to regularly for things like doctor co-pays and normal car repairs like oil changes, but there are going to be times when a true emergency comes up that you could not have seen coming – like a sewer repair or an accident that requires an emergency room visit that comes with a hefty co-pay.
An emergency fund is money set aside – preferable in a separate bank account – so that when one of those major, unexpected things happen, you’re prepared to pay for it. A $1,000 emergency fund will generally cover any unexpected one time emergency.
An emergency fund is not for that 50% off purse or gun that you’ve had your eye on for a while. It’s not for Christmas or vacation. It’s not for that last minute decision to take a weekend trip
An emergency fund is strictly for an emergency – something you could not have known to add to your budget. All the things mentioned above are things that should be a part of your budget already.
This is one of the number one reasons I hear my clients say they have abandoned budgeting in the past – something comes up and they feel out of control and have to “start over when everything collapses”
If you haven’t already, start an emergency fund today. You will be glad you did {when} an emergency comes up and you don’t have to decide between paying for it or your electric bill!