The Best Laid Plans
As we plan and budget our way through Project Money, one of our primary focuses is to increase savings. Since we are now managing a monthly budget, we have a pretty good idea of the money that is going out the door and how much we can allocate towards savings. In our family of five, this includes setting up sub-savings accounts and tracking them through Summit’s Money Minder for Family Vacation, Gifts, and most importantly an Emergency Savings Fund.
One of our homework assignments from Coach Laura was to figure out how much emergency savings is enough. Since we don’t know for sure what type of unexpected emergency could impact us (furnace dying, job loss, expensive car repair) we have chosen to look at it in three month increments.
In a perfect world, I would feel comfortable with enough emergency savings to live as we are today for six months. However, that is a long-term goal and we have found we do better with short-term goals. So, we have agreed that savings for three months of how we live today, followed by another three months of ‘cutting back’ is doable and would give us a good sense of security. Our cutting back would include:
- Not taking family trips
- Decreasing kids’ activities
- Reducing utility usage
- Pulling money from other ‘luxury’ savings
We are hopeful our family will never be in a position where choices to simply function outweigh everything else. Through our planning and budgeting for an emergency fund, we have learned that even a little each month will eventually go a long way towards a sense of security. Here are some sources we’ve found regarding why it is so important to build an emergency fund and how to build one: