Being a personal finance blogger, I use, read, write, and talk about emergency funds on a nearly daily basis. Almost everybody I speak to, brings up the Dave Ramsey rule that you need $1,000 in your emergency fund, no more, no less, and then you start paying off debts.
They also claim to live by the rule that if you already have more than $1,000 in your emergency fund, you should use the money above that threshold, to pay down your debts.
I am sorry, but as I live and breath, I disagree! $1,000 is simply not enough.
As most of you know we are working on paying off 168,000 (Balance as I write this) in student loan debt. Based on our snowball amount we will be debt free in 5 years or less. It is an incredible feeling knowing this and having a real plan.
We are parents to two little boys, and homeowners -We use my 2018 Financial Planner, like it is our means to life, as well as have weekly maintenance meetings. We track our spending, we plan, prepare, and work hard to to meet all of our financial goals.
But life happens, and as much as I wish I could, I still cannot see into the future.
In the past two weeks, the following unexpected expenses smacked us and our emergency fund right across the face.
- Partial Roof Replacement – $1,400
- Surprise RV Repair (This was deemed necessary, otherwise it would have caused major damage to the RV, ultimately destroying it) – $701
- Gas leak in the house, requiring immediate repair, so we didn’t blow up – $688
- One trip to urgent care (Me) and one trip to the ER (Greyson) – Amount, not yet known…
As you can tell, we are well over the $1,000 “emergency fund” allowance. PLUS, none of those expenses, according to Dave Ramsey, could be paid for out of the emergency fund.
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However, allowing our roof to leak into our sons room, causing water damage, and then possible mold is not an option.
Letting our RV be destroyed is not an option.
Letting our house blow up, is not an option.
Not taking care of our health, is not an option.
If we stopped supplying our savings account for the next five years, we would be left with two options:
- Letting our home, health, and “go.” No taking proper care of either of those two items, would result in a loss of an asset (House) – and loss of our health (insane)
- Having to take out a loan, put it on a credit card to make sure we maintain our property.
This doesn’t even take into account what could and will happen in the next 5 years.
I know that there are people who are able to sell their house, and rent while paying off debt, which is amazing. We have been trying to sell our house for over three years… letting it waste away, while we try to sell; is not an option.
My children (and so do we) deserve, and need a safe, clean, and well-respected place to live. Sometimes, that expense costs more than $1,000. But, with proper maintenance and upkeep – we are saving more money in the long run!
Examine your emergency fund threshold!
So with this post, I urge you to sit down and really examine your life. You need to really think about how much money you need to have on hand in order to take care of what you value most.
I also urge you not to stop your Debt Snowball – but rather adjust it for a short time, so you can stash a little bit more cash into your savings account.
Amp up your side hustles, so you can save more – and get back to fully funding your debt snowball, ASAP.
Find a way! If you really want peace of mind, that will come with being debt free – you CAN find a way!
A few things to consider when you are determining what your emergency fund should be:
- Do you own a home? If so, you need to have more than $1,000
- Do you have children? If so, you need to have more than $1,000
- Do you have health problems, or less than stellar insurance? If so, you need to have more than $1,000
- Is it possible / probable you or your spouse could lose your job? If so, you need to have more than $1,000
What are we going to do now?
Now that we have spent, what feels like to me a small fortune – completely unexpectedly. What are we going to do, to make up for it?
- cutback! we are cutting back on everything, so we can build our savings back up to our threshold.
- Cutting back on the grocery budget. Yes, I am cutting back the already tight $110.00 budget. (Grocery Budget 101 – How much should your grocery budget be?)
- Amping up our side hustles, in order to make more money over the next month
- Taking more surveys – adding products to my TPT site.
- Canceling outings, trips, summer vacations. Anything that we need to do, to make sure our family stays financially secure!
Yes it is annoying. Yes it is a little stressful. Yes, it stinks. BUT I am so grateful we had / have the means to handle all of the “issues” – without adding a single penny to our debt total! If you cannot say that you could do the same, please re-evaluate your emergency fund threshold!