Tag Archives: emergency fund

Everyone has a plan – until they get punched in the face

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This week, March 4-8th, I am participating in the second annual Women’s Money Week. Check out the WMW site to hear from other bloggers on each daily topic and be empowered to better control your finances!

“Everyone has a plan – until they get punched in the face.” –Mike Tyson, boxer.
I thought this quote was fitting for today’s topic, Future Planning & Financial Planning. I thought I’d use a photo from the movie Warrior because it’s about boxing (MMA fighting, Dave just corrected me. Whatever.) and, frankly, Dave has a man crush on Tom Hardy.

How much planning do you do for your future? Do you have an emergency fund set up? A 401k? A Roth or Traditional IRA? Other investments? Savings for a down payment on a home? A 529 plan to fund your kids’ tuition? All of these routes we funnel our money to are not for the present. They’re for what’s to come. If you want to save 20% for a down payment on a home you’ve got to hit that 1% first.

Baby Steps
Very often I’m reminded of how blessed I am to be married to a man who desires to stay out of debt and be a good steward with what we have. If you’ve followed Budget for Health for any amount of time, you know I drop the name Dave Ramsey a lot. The seven baby steps were laid out so practically in his book Total Money Makeover that when we took the first step it wasn’t even one year later that we found ourselves 100% debt free (after starting with $30k of student loans!). His baby steps are the following:

  1. $1,000 to start an Emergency Fund
  2. Pay off all debt
  3. 3 to 6 months of expenses in savings
  4. Invest 15% of household income into Roth IRAs and pre-tax retirement
  5. College funding for children
  6. Pay off home early
  7. Build wealth and give; Invest in mutual funds and real estate.

Tyson’s got nothin on us
Having that 6-month emergency fund sure helps us pursue our other financial goals without worrying. That way if we do get punched in the face, it won’t be a one-punch knock out. If I get punched, I’ll be all like, “That’s okay, I’ve got 6 months of backup. Bring it.” The same goes with investing. We’re only 24/25 years old now but when we are aged to ripeness and decide to do something else with our old selves, we’ll be able to do so and won’t need to pick up a job as a Walmart greeter to make ends meet.

New battery, new car starter, new tires…
Thankfully we’ve only had wimpy punches come our way over the past few years of marriage. Replacing our tires was our most expensive purchase but we didn’t even feel the punch because we had set aside a little each month toward car repairs so when the time came and things did start falling apart we already had what we needed to cover it.

Get moving
What small steps can you take to ensure you are securing the future of your family? You could start with opening a savings account and setting aside a percentage of each check before you blow it on something you don’t really need. You could figure out what percentage your employer will match for your 401k contributions and get that free money. Meet with a financial adviser and set up a Roth IRA. It takes a little effort to get rolling, but you’ll pick up momentum and be ready for any punches life dishes out!

What steps are you taking to plan for your future?

Recap of our 2012 financial resolutions

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It’s time to evaluate your 2012 new year resolutions! How did you do? Do you remember what your resolutions were? This was the first time I’ve made a resolution that I’ve completed. I don’t think I went too easy on myself because it was a lot of money to payoff and save. We just kept living like college students, enjoyed a simple life, and now we’re DEBT FREE! I provided an update on my 2012 financial resolutions in June because I only made 3 resolutions and we completed them way ahead of schedule! Stay tuned for a October-December quarterly budget review and my 2013 goals… I want to make more than just financial goals this time but I also want to make sure I come up with SMART resolutions for 2013. Now for a little recap of my 2012 financial resolutions:

Our financial goals for 2012
1. Pay off the rest of student loans
Done as of March 10th, 2012!
Our goal was May 2012 but we made our last payment 2 months ahead of schedule!
2. Complete our 6 month emergency fund
Done as of May 2012!
I originally thought we we’d START pouring into this fund in May and it wouldn’t be completed until September. Talk about a snowball effect!
3. Increase our retirement fund to 15% of our gross income
Done as of October 2012!
We’re currently putting 10% toward our 401k, employer match included. We each opened a Roth IRA in October and have a monthly deposit set up for both.
4. Save $4,500 for a new (to us) car.
Done as of September 20th, 2012!
Our apartment lease is up in June 2013 so depending where we decide to live we might need a second car. Thankfully our current car is still running even though it needed a few fixins this year. We’ve saved $4,500 for a new(ish) car since my dad can get a great deal on a fixer-upper and make it run like new.
5. Save up 50% of a down payment on a house
Done as of December 28th, 2012!
Our last paycheck of the year makes us tip just past the halfway point! Dave and I decided that we don’t really have any reason we’d move out of the area we currently live in, so we’ve decided to start searching for a more permanent residence. Housing and taxes are very pricey in Ann Arbor compared to other cities in Michigan, so it will be a challenge to find something we can afford that’s not a dump. A conclusion we both came to is that we value our time and don’t want to spend it commuting, so we’re willing to pay a little more to live closer to Dave’s job. We aren’t sure how much our future home will end up costing, but we plan to have enough saved up to put a 20% down payment by June 2013 since that’s when our apartment lease ends.

How did you do on your 2012 resolutions?

Our rainy day fund

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Emergency funds suck. I can think of a million different ways I could spend 6 months’ worth of savings. Why is it necessary?

The hubs and I haven’t had any big emergencies in our 2 years of marriage, but we have had a few little ones pop up. The car starter went to crap a few months ago which led to a $120 expense followed by the need for a new $118 battery. We got a flat tire the day before we left for Ireland but thankfully (and oddly) we didn’t need to get a new tire because we couldn’t find a hole and it hasn’t gone flat since we blew it back up. Aside from a few car issues, that’s it for emergencies.

Only having $238 worth of emergency expenses makes me hate having a 6-month emergency fund. In my mind, I like to think I have control over my life and according to my plans, nothing bad is going to happened to me and 6-months’ worth of savings is a bit much. Ah, but the good Lord has a way of sanctifying those he loves through trials. Why else would the apostle Paul say in Romans 5:3-4 “We can rejoice, too, when we run into problems and trials, for we know that they help us develop endurance. And endurance develops strength of character, and character strengthens our confident hope of salvation.” No difficult life situation is ever welcomed, but retrospectively I end up thankful for the growth that occurred during that time and how my character was molded into who I am today.

Why did we decide to establish an emergency fund?

  • Peace of mind
  • So we don’t feel like we’re one oops away from falling into debt
  • We don’t have to freak out when oops situations do occur
  • Because Dave Ramsey told us to (says hubby)

Aside from a few of our own reasons, I become more grateful for our emergency fund as I continue to hear from friends who have had their own unexpected financial challenges:

Fat Guy Skinny Wallet – Forced To Dip (Or Plunge) Into Our Emergency Fund
See Debt Run – Help, I Can’t Turn the Water Off!
Newlyweds on a Budget – Back to Broke Newlyweds
Simple Organized Living – Our Car Accident… and a New-To-Us Vehicle

How do you decide how much to keep in your emergency fund?

Budget Review: April – June 2012

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Every 3 months, I’ll post an update showing how our money was allocated. Consider this quarterly update a tool I’ll use so you can hold me accountable to reaching our 2012 goals!

What’s happened since our last budget review?
- Dave got a promotion May 11th! His title is now “Mechanical Engineer II.” In non-engineering terms, it means “I get paid more to do more stuff.”
- I got my wisdom teeth pulled (I only had my top two pulled; bottom ones never existed)
- Rent went up $10 a month when we renewed our lease for another year
- We went over grocery & entertainment budget 2 out of the 3 months…oops
- We increased our tithe to 15%
- We finished off our 6-month Emergency Fund
- We started saving for a new(ish) car we’ll need next year
- We had to buy a new car starter ($120 + free labor from my dad & hubs) and a new battery since it was 5 years old and about to die ($118 + free labor from my hubs).
- We got a 3rd paycheck in June and put most of it toward a new home we hope to buy sometime over the next two years
…and finally…
- GUESS WHO’S PREGNANT?
You guessed it! Wait, you guessed my sister-in-law right? It’s not related to our budget, and it’s not me, but still exciting news and I wanted to share ;)
April through June (Actual spending):

It was getting kind of confusing to establish an accurate budget because I originally accounted for Dave’s salary, my part-time salary from the health department, and an average of 6 days per month from my contingent job at the hospital. With our new set up, our budget will only account for the consistent income and any additional income from days I work at the hospital will go toward saving up for a new(ish) car and then toward a down-payment on a home once the car is saved up for.

Past budget reviews:
July – December 2011
January – March 2012

How are you doing with your budget?

Financial resolutions for the New Year

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If you read my post about SMART goals, you know that I believe goals are great things to have if thought out well. We still have a few days left in the year to think about healthy habits we want to carry over or start in 2012. Aside from your goals on food and fitness, have you thought about making resolutions for your financial health? Personal financial health is of high importance in addition to physical fitness for those who want to have a more secure future. Whether you want to pay off a large amount of debt or just want create your first budget sheet to keep track of expenses, you need to start somewhere.

Our financial goals for 2012:
1. Pay off the rest of student loans
2. Complete our 6 month emergency fund
3. Increase our retirement fund to 15% of our gross income
4. Save $4,500 for a new (to us) car.
5. Save up 50% of a down payment on a house

Need some ideas for where to start?

- Download Dave Ramsey’s budget sheet and categorize your spending
- Create an account at Mint.com to set up budgets and keep track of your money
- Put back a percentage of your paycheck into savings. If you’re already doing this, can you increase that percentage this year? You can usually set this up automatically with your bank.
- Cut costs. Are you eating out too much? Splurging on clothes too often? Do you need that coffee every morning?
- Analyze your credit score and find out how to increase it
- Contribute to your retirement savings (get rid of debt and jump on this one!)

What are your financial resolutions for 2012?