Vacation Fund
Emergency Funds For Different Kinds Of Emergencies
One of the key components of my family’s financial turnaround was the addition of an emergency fund. An emergency fund may be best described as a pot of money used to handle life’s emergencies while helping you avoid reaching for a credit card. In the past it was these small to medium emergencies, and the subsequent credit card charges, that seemed to keep us on the hamster wheel of debt.
Another thing that helped in our recovery was the mental, and even physical, separation of small piles of money. We accomplished this by opening an online savings account at ING Direct that allowed us to open several additional “sub-accounts.” We identified a number of unique savings goals and created an account for each one - Christmas savings, a vacation fund, orthodontic services for our kids, etc. We also recently divided our emergency fund into logical (to us) separate piles of money.
Specialized Emergency Funds
The inspiration came from a post I read over at Gather Little By Little about creating specialized emergency funds. I liked the idea of dedicating a portion of money to a specific emergency situation, and the idea folded in nicely with an earlier tweak to our financial plan to create a local emergency fund.
In this economy, it also seemed like a good idea to tag some money available to pay for things like the mortgage, COBRA insurance, etc. in the event of a job loss. Sure, the sum of these expenses could be calculated and serve as your goal emergency fund amount, but knowing I have 6 mortgage payments or 6 months of COBRA in an account helps me sleep at night!
Our Specialized Emergency Funds
- Local emergency fund. This fund represents to the first $1,000 of our larger emergency fund. Instead of keeping it all in online savings accounts, we like the idea of $1,000 or so saved at a local bank. We can write local checks for repair services, make cash withdraws, or do business inside the bank branch.
- Mortgage fund. My goal is to have exactly six months of mortgage payments saved in a dedicated account. After watching my mom struggle to stay afloat financially after a stroke and six months of unemployment before disability kicked in, it has strengthened my desire to have this fund in place.
- Family health insurance fund. In the event of a job loss it could be difficult getting rehired in this economy. So having 3-6 months of COBRA insurance premiums sitting around would make me much more comfortable. In fact, if I ever venture out on my own, this fund could provide insurance for a few months (COBRA or a family health insurance plan I shopped for somewhere like eHealthInsurance.com).
- Automotive repair/replacement fund. We combined auto repairs and replacement funds (where I will continue sending our car payment after it is paid off this month). When we have enough saved to buy a car for cash, we’ll upgrade my wife’s current car and I’ll drive hers a while longer. In the mean time, the funds will be used to repair my old van, which has been limping along here lately.
- Household repairs fund. The remainder of our emergency fund is in a generic account we’ve labeled “household repairs.” This could cover things like a new hot water heater or a refrigerator repair.
I feel compelled to add this small warning - be careful not to add too many specialized emergency funds, and try not to confuse them with other targeted savings goals you may have. For instance, my car replacement fund really could have stayed separate from my repair fund, much like a “new house down payment” savings fund would likely be separated from household repairs.
Basically, do what works best for you, but don’t too carried away creating dozens of accounts or you will create more headache accounting for the money in the long run.
Post from: Frugal Dad
Weekly Roundup - Spring Break Edition
Nothing like another Spring Break vacation at home. I’ve grown weary of the term “staycation,” so I refuse to call it that this year. With all that has been going on with us personally we decided it didn’t make sense to spend the money to head out on a vacation this year. I’ve already started a vacation fund for next year though, because I don’t think my wife and kids will let us get away with another year at home!
The Fab Five
Save Money at Baseball Games. We’re headed to a spring football game this weekend, and I’ll plan to apply many of these great tips. The only caveat, I’ll have to spring for a bag of spicy boiled peanuts and an ice cold Coca Cola. Sorry, but it’s a tradition! (@Lazy Man and Money)
How Do You Know When You Have Enough? I really enjoyed this post, especially the section, “Four Qualities of Enoughness.” Recognizing you have reached “enough” is a fundamental milestone in leading a frugal lifestyle. Without reaching contentment you will constantly want more and more stuff. (@My Two Dollars)
Living Your Passion: What It Takes To Be An Entrepreneur. Jeff does a powerful job of breaking down the main ingredient required - G.R.I.T. Read on to find what the letters stand for, and then act on them to live your passion. (@My Super-Charged Life)
Nine Pieces of Software I Use Every Day. I resisted using Tweetdeck until reading this endorsement from Trent. I’m glad I did. It makes following a large number of Twitter users much easier to manage. Several other nuggets in this article, too! (@The Simple Dollar)
Taking Control of Your Life By Finding Balance. Enjoyed this article and the ideas presented, particularly the part about creating boundaries. I need to do a better job of compartmentalizing my life - work, home, blogging, instead of allowing these things to bleed over into one another.(@Money Smart Life)
Best of the Rest
Frugal Entertainment Rule: You Must Try Redbox
Your Home Office: Ideas To Set Up Your Place of Work
Six Conversational Habits to Ditch Today
Get Your Emergency Fund In Place Now
How Long Does It Take Your Broker to Answer Your Call?
12 Things Every Teenager Needs To Know About Money (And How To Teach Them)
How To Get Rich By Choosing The Right House
The 80/20 Rule and How it Applies to You
Site of the Week
Repair Pal. This week I have had to get some work done on my 19 year-old van. There’s a point where parts are cheaper the older the vehicle gets, and then the curve starts to go up again as things are harder to find. Fortunately, it is a GMC van, and the 1990-1995 parts are still pretty easy to find. RepairPal.com provides estimates for the most frequent repair jobs for your particularl model. The estimates are broad, but it should give you a reference point to help determine if your mechanic is giving you the shaft.
Post from: Frugal Dad
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