The Oh $h*t Fund

Sometimes things happen that make me think thank god I have a savings account, that if I didn't have a cushion, no matter how small it may seem, the most insignificant fall could have ended up breaking a bone. Instead, I just got a good internet workout with my ING account.

Saturday morning M and I left Brooklyn for a three week vacation (!!). I won't bore you with the details, but essentially a large purchase for M's work went on our credit card right before the card's monthly statement ended. This meant that the check reimbursement from work would not come until a few weeks after the payment was due. While we were away on vacation. On top of that, my freelance check would also come in-- you guessed it-- while we were on vacation. I guess the old me would have paid some smidgen over the minimum payment on the credit card, canceled the automatic IRA investment that happens on the 15th of every month, and just gone into a rationalized debt for the sake of a few weeks of summer vacation.

Okay, maybe this doesn't count as an emergency. But sometimes calling something an Emergency Fund is a little more alarming in name than what life throws at us. So I transferred some money from our aptly labeled ING Vacation Fund and Emergency Fund into our respective accounts and will enjoy vacation free from the stress of what is going on in our bank accounts. When we get back and deposit our checks I'll just transfer the money back into the ING accounts. Because you never know when the next oh $h*t moment will happen.

And that's just one way I avoided 7 Surefire Ways to Stay Poor

My Progress Bars

It only took me months and months of failed attempts and technological ingratitude, but finally I put up some progress bars. I've been thinking about my progress bars for a while now, eyeing them on other blogs like a parked E-Class in the driveway next door. Not that I live in a place with driveways, but neveryoumind. I got my progress bars (thank you ms. m&p!)- and just in the nick of time, because I'm going to pay off my student loan this month!

Nine months ago I stashed M and my emergency fund in a CD. Since interest rates were going to drop even further I locked in the high rate. For a while, interest rates have remained higher than my student loan interest, so I chose to save over pay off the loan. Plus, student loan debt is "good" debt that was boosting my credit score, and my unemployed self was feeling a little clingy to the savings account. But now the CD is maturing (after having earned $235.73!) and the new interest rate is below that of my student loan. Basically I'll be earning less interest than paying out in interest on my loan, so when the CD matures I will pay off the balance of my student loan with most of our small emergency fund. However, I will continue to "pay" the same amount as my student loan payment, but I'll put it back into our e-fund and replace the money I took out.

Juggling debt and saving is something of a long haul, and I have to say that I will be relieved when the last of my big debt is gonzo. It's a nice way to start the year :)

Shelter from the Storm

There's a lot of howling in the winds that blow down Wall Street, and it's a perfect time to bring up the inevetable. There will be a moment when you're just plain $h*t out of luck. You won't have the Fed discount the rate at which you can borrow in order to bail your lame a$$ out of monetary self destruction, no, your credit card will probably increase its APR when all is said and done, so unlike Wall Street, there are no handouts for you. We all need a little shelter from the storm.

Okay, maybe its heresy to work Bob into a blog about $$$, but that is the best way to describe an emergency fund. A financial emergency is when you need more money than you are making (or not making, as it may be) in order to eat at your table and sleep under your roof. You can get canned, downsized, change jobs before you actually find a job, lose your lease, lose a roommate and gain the whole lease, have a family emergency that requires a leave of absence, have a kid that requires you take an unpaid maternity leave, break up with your girlfriend, the list is endless. The other problem is that if you have any kind of job that is not bona fide nine-to-five, you have an unpredictable wage, my friend, and you need an emergency fund more than the next guy reading Money magazine and nodding his head saying, yeah I know this already.

I feel like having an emergency fund is tied for first place with having zero credit card debt in the financial must-haves category. Even though it is faster to funnel all your money to pay off any revolving credit card debt (meaning any debt you don't pay off monthly and hence chuck change to an interest rate), some people have debt that will take them years to knock off. You simply can't wait that long to accumulate your emergency fund, because chances are the emergency won't wait that long.

The question now is, how much do you save? Standard answer is three to six months of living expenses. I'm talking rent/mortgage, monthly bills, food. I'm not talking about the monthly cable bill, but I would be talking about the car insurance. I would add student loan payments. Some would argue you could defer them, but if you can save for it I say add it. You want to add up the bare bones expenses, and cut the fat. If you have credit card debt, include the minimum payments. The amount of months you save up for is the amount of months you feel are the most you could conceivably be without work. It's the amount of time you would be unemployed and absolutely freaking out. While unemployment isn't the only financial emergency, it's the most expensive one likely to happen.

But don't be fooled, it's not just about sheltering you from a financial emergency, it's about sheltering you from the financial consequences of trying to survive the emergency; maxing out your credit cards to live, losing your apartment because you can't pay for it, taking on some nut job roommate you found on craigslist while you sleep on the couch, liquidating your IRA or borrowing against your pension, playing lotto to pay the mortgage, taking a cash advance on your credit card, or moving back in with your parents because you got kicked to the curb.

Listen, you're already staring at a computer screen. Go to your internet savings account and start saving a little every month. Set small goals. Let's say you need six grand to cover three month's expenses, just start saving for a thousand bucks. Know the big picture, and chip away at it one step at a time. Trust me, you'll sleep bettter at night.