Over the last several months, we’ve had to do a ton of repairs. And, I don’t just mean the twenty-dollar patch and paint kind of repairs. I mean the big stuff. The stuff that costs hundreds of dollars to fix. The stuff that you never really see or think about until it breaks and you need it. The stuff that makes me want to pull my freakin’ hair out because it costs so much money to fix.

Of course, I didn’t have to pull my hair out. Me and my pretty mane made it through these trying times (mostly) intact.

Yes, it is frustrating to spend money on repairs. It’s especially frustrating to put money back into a house when you know you aren’t going to see any return on those repairs. But even though I was a wee bit perturbed, I didn’t sweat it too much. “Why’s that?” you say. Because I gots myself an emergency fund! HOOOOOO!!!

What is an Emergency Fund?

If you’ve been hanging around any personal finance blogs for long, chances are good that you already know what an emergency fund is. Henceforth, I dub you peeps “Level 1 Rockstars” and hereby permit you to skip ahead to the next section. If you want to hang around with us, a quick review certainly wouldn’t hurt…but I ain’t mad atcha if you want to skip ahead. For those who want a quick refresher or don’t know what an emergency fund is, let’s discuss.

An emergency fund (sometimes referred to as an e-fund, EF, or any number of other abbreviated terms) is a savings fund that you keep stashed away just for emergencies. Pretty simple, eh? This fund should be easily accessible (think savings account not CD or mutual fund) and should be kept separate from your other accounts. NOOOOOO MIXING HERE PEOPLE! This account is for emergencies only and shouldn’t be touched unless you absolutely need it. Capiche?

Hot Tip! – The best way to store your emergency fund is in a separate account. That way, it’s there when you need it but it stays separate from the rest of your money. Personally, I think a high yield online savings account is a great option. Because it isn’t your “usual” bank account, you’re more likely to use it only for emergencies. Get started here.

When to Use Your Emergency Fund

No matter if you are financially independent or deeply in debt, things always pop up. Your emergency fund is there to help you cover the cost of these emergencies.

So, what constitutes an emergency? Well, if your car breaks down and you need to repair it, you have yourself an emergency. If your water heater goes kaput, you have an emergency on your hands. If you lose your job and can’t find work for a few months, that my friends is a definite EMERGENCY! Your emergency fund should be used accordingly.

Getting your oil changed and paying for gas – not emergencies. If you’ve forgotten about your anniversary, going out to a nice last-minute dinner may seem like an emergency, but it isn’t. Scoring backstage passes for your favorite band is pretty freakin’ cool, but it isn’t an emergency either. Those things should be budgeted for in your monthly budget, y’all.

How Much Should You Keep in Your Emergency Fund?

Now that we know what an emergency fund is and what it’s used for, you probably want to know how much you should keep in there. Unfortunately, the answer is “It depends.”

For most people, a fully funded emergency fund should have somewhere between 3-6 months of living expenses. However, if you have a highly variable salary, have a lot of expenses, or just want to be more conservative, you may want to keep 6-9 months of expenses in that bad boy. If you have a very stable job and low expenses, you’re probably good to go on the lower end with 3 months expenses.

The key is that an emergency fund should help you to feel comfortable without harming your other savings plans. Personally, I like to keep mine sitting in the 6-9 month range because I like knowing that we’ll be fine financially for a long time if anything ever happens. Plus, I tend to be on the conservative side when it comes to handling my money.

Now, just because you can’t fully fund your emergency fund immediately doesn’t mean that you shouldn’t start doing it. If you are trying to pay off debt, the very first thing that you want to do is to get yourself a starter emergency fund of at least $1,000. Try saving $100 a month, more if you can. That way, if when an unexpected expense pops up, it doesn’t derail your debt payoff strategy. You simply pay for the event out of your emergency fund, fill the fund back up, and keep on rolling with your plan as if nothing happened. #YouGotThis

So, where do you find this money? Easy. Go back to your budget and expense tracking. Look for a few spots to make some easy cuts, and get rolling! Even better, use a free app like Trim to do it for you. (You can check out our full Trim review here.)

Then, just plop that money in a savings account…and you’re good to go!

Why an Emergency Fund is the Bombdiggity

God, I LOVE EMERGENCY FUNDS!!! Seriously, I love ’em. And while I’ve had to dip into mine many, many times over the past few years, I’ve never had to do so with as much regularity as I have over the last few months. Without our emergency fund savings, our financial goals would have been derailed (for a while) by all of the emergencies we’ve had to deal with lately.

You know that old saying about how when it rains it pours? Yeah, that is how it has been around our house since about February. Here is a list of things that we’ve had to repair since then:

  • Furnace repair – $300
  • Water heater repair – $700
  • Chimney repair (budgeted) – $1,000
  • Air conditioner repair – $900
  • Lawn mower replacement – $400

BAAAAAAHHHHH!!!! That is a total of about $3,300 in repairs since February, people! And even though we actually budgeted for the chimney repair, just looking at that list gets my blood pressure up. But, you know what would’ve really frayed my nerves? Not having the money to pay for it.

Make a Plan

We are in a great financial position that allows us to keep our emergency fund fully funded without putting stress on our other savings goals. Yes, we are somewhat fortunate in that respect, and I totally understand that some of you may not be in the same position. However, it didn’t just happen by accident. Our emergency fund was stocked by design. Although you may not be able to build it up as large or replenish it as quickly as we can, you need to have a plan.

Start building your emergency fund today. Know how much you need. Keep it locked, loaded, and ready for action when you need it. Make sure you can gain easy access to it when the need arises (and it will). When you are prepared for the inevitable emergency, you’ll be able to handle it with relative ease. Yeah, it may still sting, but it won’t derail your big picture goals. You’ll pay for it and move on with your life #LikeaBoss!

Do you have an emergency fund? Have you had to use it recently? How much money do you use to fund it and where do you keep it? Join the discussion in the comments below!

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