Pastor Dave:
Dave Ramsey says it well (and with humor): Murphy (of Murphy’s law fame) is everywhere, and he strikes most often when you’re least prepared.
So, if you can be prepared with money saved up, you ward him off.
I remember several times in the first years of our marriage when I was a hero to Katie because I had some money (usually just a couple of hundred dollars; it took a year or two to have a thousand saved up) stashed away when an unexpected expense came up, whether it was a car repair, or the ability to take her out for a special weekend trip when life got hectic, or, just as likely, to make up for if we overspent some month.
It definitely pays to be able to smooth out the bumps of life with a stash of cash…it makes financial worry all but disappear.
Dave Ramsey recommends $1000 emergency fund as a starter.
If you don’t have that yet, get to $100, then $250, then $500.
Ultimately, Dave says get to three to six months living expenses. That covers you in case you lose your job and gives you time to catch your breath, seek God, and find out what to do next.
One little twist we have: We have two “emergency funds.” One is an ING savings account that I would have to look up the account numbers and passwords in order to access…that’s where we keep money that we really don’t want to touch except in the case of a REAL emergency.
The other one is a savings account linked to our checking account as overdraft protection. I am a HUGE fan of this. If my bank didn’t offer this, I would find another bank.
We manage our budget by the checking account balance, but if we make a mistake, both spend at the same time, whatever…the funds are automatically and painlessly sucked out of this linked savings and we don’t embarrass ourselves at a restaurant because the check card is rejected and I don’t guess we’ve had an insufficient funds fee as long as I can remember. (Though, I’d guess we probably overdraw our checking once or twice a month…I’m telling you, overdraft protection is the best).
We store our monthly car repair savings, our Christmas savings, and a couple of other small things we save for in that overdraft protection savings account, so every month it builds a little a bit.
If we get too far off track by overspending too much and draining this savings, we’ll call a spending moratorium for a while and try to make it up.
Anybody got an improvement on this idea?
Leave a comment.
November 17, 2008 at 2:19 am
I am so grateful for this series and anxious for each message on Sunday as well as the practical strategies session on the 21st! The blog is a great extra. Thanks, Pastor Dave!
November 17, 2008 at 10:52 am
Heidi,
Thank you for reading and for the kind comments. The 21st will be fun. I look forward to learning from you guys, too. Have a great week!
November 18, 2008 at 11:09 am
Here is a short entry from my blog a couple of months ago. It contains some tips on saving money, which can then be used for an emergency fund.
TIPS FOR CREATING EXTRA ROOM IN YOUR BUDGET
With gas prices rising, many American families are starting to feel a financial pinch. My family and I have experienced a pinch for several years now due to layoffs and slow growth in the airline industry (I made less than $15,000 in 2005). We have learned several lessons about how save money.
First, take a close look at your spending. Most of us spend a lot of money on things that we don’t really need. For example, do you really need a fancy new cellphone for $200 when you can get a free one? Do you really need all those extra cable channels? My cable company offers a minimum package of network channels for about $8 per month, a savings of $45 over the next package. Buying bottled water and $3 coffees also adds up quickly and is not necessary. Go to the library instead of Blockbuster and the bookstore. Most of us can find some areas where we can trim the fat.
Cars cost Americans a lot of money. Keep your old car after it is paid off. This will free up the amount of your car payment ($300-500), but that is not all. With your car paid off, you can reduce your insurance and drop the expensive collision coverage, saving more money. By shopping around for gas, you can also save money. Visit http://autos.msn.com/everyday/gasstations.aspx?zip=& src=Netx to check gas prices in your neighborhood.
Another great source of savings is eating at home. A typical restaurant restaurant meal for my family of three is at least $15, even at a fast food restaurant. Multiply that by several times per week and it adds up quickly. Clip coupons for what you need and browse local supermarket sale papers. Many neighborhoods have a discount grocery store, such as Sav-A-Lot. Also, buy generic brands of food. The generic brands meet the same FDA standards as more expensive brands. In most cases, you can’t taste the difference. In some cases, generic brands actually taste better!
Finally, a long term solution to solving your credit crunch is to get out of debt. It takes time, but paying off credit cards and loans will free up hundreds or thousands of dollars each month. It will also relieve the stress of wondering where your next payment is coming from. It will also enable you to start saving so that you won’t feel the pinch in the future.
http://captainkudzu.blogspot.com/2008/06/tips-for-creating-extra-room-in-your.html
November 20, 2008 at 1:13 pm
Not possible to improve on you or Dave Ramsey! So true about money stashed away being able to cover a multitude of “Stupid Tax” as he calls it. Man, if we knew then what we know now…. Seriously you gave me an idea I hadn’t considered yet, an “extra” emergency fund hiding place. Linda and I will look into this soon. Thanks David!
November 21, 2008 at 1:29 am
Glad to help. The extra emergency fund is one of my favorite tips. We can be a certain amount of undisciplined and recover from it. If I actually have to look up the info to access the big emergency fund, it’s like going to DEFCON 1…it put us on high alert!