For years, my credit card was my Emergency Fund but as I got closer to paying off my debts, I realised that we really did need an Emergency Fund otherwise, I’d never be able to be completely debt free.
This year has been a big one for us financially with a big shift in focus for us as we finally reached the end of our journey to being debt free and then started to make regular, significant overpayments to our mortgage.
The next step for us is to build an Emergency Fund that we can use in an emergency so we don’t have to use our credit cards to pay for the unexpected things that haven’t been budgeted for. I started our emergency fund earlier this year as we crept closer to our debt free date but it was only after we’d paid off the last credit card that we really started to focus on it.
I thought I’d give you a little bit of an update on how we’re getting on today and tell you how we’re funneling money into our emergency fund.
First of all, we have just over £1000 in our little Emergency Fund right now which is great considering we’ve also been saving for our holiday next month and the spending money we’ll need whilst we’re there during the same period that we’ve been seriously paying into our Emergency Fund account.
We’ve been transferring £100 a month from our current account into the Emergency Fund account automatically on payday – something we set up the same day we paid the last credit card off and set up the mortgage overpayments. Doing it this way meant that we didn’t get chance to miss the money as it was simply the money we’d previously been using to snowball our debt.
We’ve paid a bit extra here and there too so we’re in quite a good space with it right now I think.
If we were following the seven steps that Dave Ramsay recommends then our goal should be to have 3-6 months worth of wages in there but that feels like a lot to squirrel away when I have other priorities – I’d like to start investing into some sort of investment fund at some point but I’m torn whether to throw everything at my Emergency Fund until I have six months worth of expenses or whether to split my focus and look into investing at this point.
I’m thinking about cancelling a few monthly payments now we’ve reached £1000 in our Emergency Fund – we have a Petplan for each of the dogs on top of their pet insurance that covers all vets appointments for example. They both saved us money at the time we took them out as Buddy’s was when he was poorly with a skin infection which meant we had quite a lot of appointments in a short space of time so paying for this plan meant we didn’t have to pay for the actual appointments, just the treatment. Monty’s was worth it as it covered all of his puppy checks and injections which would have cost a fair amount.
There are other benefits with the plan like free worming and flea treatments but I could buy them myself and still save so I’m thinking we could cancel this cover and put the money we save into the emergency fund instead to use if ever we need it. I’d never cancel their insurance but this seems like a waste of money at this point.
I also considered cancelling our British Gas boiler cover but that’s saved us a couple of times now and has been worth every penny so that’s staying.
Do you have an Emergency Fund yet?
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