I have been fortunate enough to still be employed during this pandemic, but it occurred to me several weeks ago I had not made savings a priority part of my financial journey. I have been focusing on getting my debt numbers down and making up my shortfall each month. My thinking was I could always 1) stop paying non-essential debt/bills, 2) raid my sinking funds, and/or 3) use the available credit on my credit cards if I get in a financial bind.
This is not a sound strategy for a number of reasons.
- Not paying my bills/debt will put me further into a hole.
- Not paying my bills/debt will cause my credit score to tank, which I may need access to in the next few years.
- Many of my sinking funds are set up to pay infrequent bills, and when you rob Peter to pay Paul, Peter is eventually going to want his money.
- This strategy relies on my situation remaining the way it is currently, which is not guaranteed. What if my available credit is cut? What if I lose my job? Then what?
According to a Morning Consult survey described in a CNBC personal finance article, “nearly 18% of adults with an annual income of $50,000 or less have no savings, while some 34% have enough to cover just three months of expenses.” (https://www.cnbc.com/amp/2020/04/02/americans-expect-to-burn-through-their-savings-amid-pandemic.html)
Some people believe $1,000 is a good emergency fund, while others say you should have around 3 months of expenses saved up to start. If you are barely making it, either one of those numbers is high enough to make it seem almost impossible to achieve. However, I say just start. Even if it’s just spare change (find a penny, pick it up… isn’t that how the old ditty goes?). Even if it is just rounding your purchases to the next dollar, whether the total is $12.11 or $4.82. It’s better than zero.
After reviewing my own situation, I decided my starter emergency fund savings should be $2500. This isn’t a month’s worth of expenses, but it would give me a little breathing room to figure things out without having to make a rash decision in the event something happens.
I’m going to track it using this lovely chart from debtfreecharts.com that I repurposed (it was originally a debt tracker; Heidi has tons of others but I liked this one and did not want to waste the black ink I used printing it – working on being frugal):
Slow and steady. $5 at a time does not seem like much, but it is a realistic start and better than nothing. Remember those S.M.A.R.T. goals?
How is your (liquid, emergency) savings looking?