I’ve written about my Emergency Fund in the past. Possibly because I’m super proud of actually having it (and believe me, for somebody who has never been good with money, it’s a huge accomplishment). Or possibly because it’s super important you have it.
But the journey hasn’t been easy for me and I’ve made a lot of mistakes along the way. It’s the end of the year, so as I reflect on what 2019 has been like and what I hope to accomplish in 2020, I might as well share with you:
Mistakes I made with my Emergency Fund:
I haven’t automated my contributions
I know it’s such a basic mistake. Everywhere you go on the Internet, everybody is telling you to automate your savings. But for a while, I felt I needed to transfer that money myself. The physical act of clicking the button to transfer money into my savings account was giving me a boost of confidence.
It was telling me: “Look! You’re not as bad with money as you think! You’re saving for an Emergency Fund!”
But it was also taking my attention away from other financial goals. Once I put in place an automated system, I no longer have to think about it. I have time and energy to focus on other goals.
I used my Emergency Fund for non-emergencies and loans
I think like this is a common mistake for people who are just starting out on their journey to financial freedom. And I can see why.
Suddenly, after years and years of not having money, you have this bank account where there’s money. And it’s just laying there. And you have stuff to buy and the things you want. Why would you look into a payment plan when you can just take that saved money and get the item immediately.
At least, that was my justification for dipping into my Emergency Fund to pay for something that wasn’t an emergency. In fact, it wasn’t even a necessity. Yet I still took the hard-saved money and spent them on this item… that I don’t even remember…
Another mistake in this category was taking money out of my Emergency Fund to loan them to my sister; money I’m not entirely sure I’ll ever get back.
Though that mistake, no matter how bad I feel about it, is one I can’t guarantee won’t happen again. My family’s important to me and knowing I’m able to help my sister means the world to me.
I didn’t treat my Emergency Fund as a priority saving goal
I’m a little ashamed to admit that I’ve been guilty of this for the majority of the year. I kept prioritizing other savings and putting in what could only be considered a “minimum” amount each month. As a result, building up my Emergency Fund is taking ages.
So as I’m considering my budget for 2020, I decided to up my ‘minimum’ contribution to my Emergency Fund and if I have any additional income beyond my salary, I will put part of it into my emergency savings, instead of putting it all into the down payment for my apartment.
I put my Emergency Fund money into a time-locket account
A couple of months after I had realized I managed to build up my Emergency Fund, and before any emergency truly hit, my bank sent me a promotional email about a high yield account I could open for 3 months. Since at the time it felt like “I had money”, I jumped right in.
Nothing bad happened. But if it had, boy, would I be screwed for a couple of days while I tried to release money from that temporary account.
The whole point of having an Emergency Fund is that the money is easily accessible when you need it. So that I can fix or replace the washing machine that’s on its last legs without a fuss or going into debt.
Nowadays, while I can manipulate my savings to get the most out of them, my Emergency Fund money I not something I touch unless completely necessary.
Learn from my mistakes.