American Family Budget: The Emergency Fund Gets Put Into Action

Before my husband and I started following a monthly budget, we had already built up our emergency fund of six months’ worth of expenses.

While the size of an emergency fund s from person to person, we decided on that amount because I am a worrywart.

It’s not like our income fluctuates that much. Stewart is a tenured university professor, not likely to lose his job, although budget cuts have affected us in the past.

Financially speaking, I am primarily a stay-at-home mom and any money I pull in from my writing is gravy, going toward funding extras that are not included in the monthly budget.

But you never know. In my previous career I was a TV producer, and I learned to plan for the worst. That attitude served me well, and it has carried over into my family life.

Beginner’s Luck

Building up our emergency fund was an accidental success. Most people who set out to straighten up their finances begin with a pile of debt and no savings at all.

Looking back, I see that we started out that way, but our progress was unintentional.

We paid off our debts little by little – credit cards, student loans, car loans, etc. – without really setting a goal, and then a smart real estate investment gave us a huge boost.

In essence, our new-ish large home loan is just a consolidation of all of our previous debts.

Along the way we socked money into an interest-bearing savings account that we keep separate from our checking account.

It’s at the same bank, so we can easily transfer money and access it in a true emergency.

Ever the smug one, I was happy knowing the money was there, even though it wasn’t earning more in a mutual fund or similar investment.

These Things Come in Threes

Now here we are, squeezing every last dime out of Stewart’s paycheck, and drawing from the lump sum he makes for teaching summer school, plus using the “gravy” that I bring in, to stitch together some semblance of our former lifestyle (that is, the one we lived irresponsibly, overspending by some $2,500 per month before we started our budget).

At least we have our emergency fund I would say to myself, which is a comforting thought.

Until we actually had an emergency. Or three.

Termites!

A few weeks ago I noticed some weird little brown things collecting on my bathroom counter.

They weren’t rodent droppings. They weren’t spilled potpourri or some exotic facial scrub that I had forgotten about. I called Stewart over to look. “Uh-oh,” he said. “Termites.”

Three inspections later and we have chosen to fumigate because they are found throughout our house.

That’ll be almost $2,000, please. (Cue cash register sound effect.)

Meanwhile, over the past four years our once-little boys, who are now getting to be pretty big boys, have routinely barreled down the stairs from their bedrooms into the banister with a crash.

Every day. Sometimes many times a day.

That has destroyed the banister, which spits out one of its poles onto the tiled floor below with a resounding clatter every time a boy’s body hits the railing.

The first contractor’s estimate to replace the banister was $5,000.

My head almost exploded, and Stewart’s solution was to do it himself, which took a lot longer but only cost about $750. (Cha-ching, again.)

Lastly, this isn’t exactly an emergency, but it keeps me up at night, especially now that we have filled our heads with financial information.

We need estate planning documents. For a married couple with two children and a home, life insurance is helpful but it’s not enough.

I drew up the documents on my own using online tools, which is very do-able in many cases, but I always got cold feet when it came to transferring our assets into a trust.

In California it is best to have a trust so that your assets do not have to go through costly, time-consuming probate courts.

And I, always planning for the worst, wanted very much to have instructions for the care of our children recorded and held in reliable hands in case something terrible happens.

We hired our tax accountant who is also an estate planning attorney to draw up the paperwork for us.

The project required an hours-long meeting with him and his legal secretary so they could learn about our assets and our wishes.

It was emotional for me, to contemplate my own disastrous end, but it had to be done.

Somehow, the wheels we put in motion back in November when we created our budget finally gave us enough momentum to take care of this big, grown-up step.

For a will, a trust, and powers of attorney for finances and health care decisions, we’ll pay $1,750. (One final cha-ching!)

The total bill for all of these “emergencies” is up to $4,500. That puts a dent in our emergency fund, indeed.

It is fortunate that we have this account to pay for these expenses in full.

In fact, the exterminator gave me a five percent discount for paying up front, in cash. “Actual green money” was the phrase he used, and I gleefully agreed.

There Goes the Gravy

But now we have to pay ourselves back. And we never did build “savings” into our budget, as one commenter helpfully pointed out several weeks ago.

Now I see that was pretty dumb.

Money comes in and money goes out. Extras that we pay for with my “gravy” will have to take a back seat while we get the needle on that emergency fund tank back up to “full.”

What is your emergency fund goal?

Kim Tracy Prince is a Los Angeles-based writer who has a husband, two little boys, and an obsession with spreadsheets.