This past week, my wife and I were exposed to the possibility of having to dip into our emergency fund. And while the saver in me HATES the idea of having to spend that money that we worked so hard to save up, the other part of my realizes that this is the very reason that we have an emergency fund: to get us through the most difficult situations.
Where We Have Been Directing Our Extra Money
As my most faithful readers know by now, managing your extra money is one of the most important elements to being financially successful. Sure, it’s important to take a look at all of your expenses, but directing your extra money towards savings and retirement is a sure-fire way to excel.
For the past several months, despite moving to a more-expensive location, my wife and I have been putting money away towards a future downpayment for our home. We’re about 2 years away from being financially secure enough to take on a large mortgage, but that doesn’t mean we’re not working towards it right now. We don’t make a lot of extra money right now, but any money that is over and beyond what we are contributing to retirement goes directly to the down payment fund.
What Could be Changing
In the past week, my wife learned that her organization is re-organizing and her department is going to be changing. While it’s unclear what will happen as a result, there is a chance that Mrs. 20s will be forced to look for a new job.
If the worst happens and Mrs. 20s is jobless, we would be seriously strapped for cash. I make decent money, but we only survive/thrive because of our dual incomes. As I mentioned, it’s still unclear if we will have to use our emergency fund to get by, but the good news is that because we have been saving up a down payment for a home, we have a larger emergency fund than normal.
We’ve typically had about 6 months of expenses in a high-interest savings account, but now we have a little more than that. The other side of that statement is that if we had to use some of our emergency fund, we’d be using our down payment just to survive – and ultimately delaying when we’d be able to buy a home. And that’s not to mention the fact that I would be less likely to buy a home because of fear of not being financially ready to take on a large mortgage (who knows when you can lose your job).
How Long Could You Survive?
Out of curiosity and preparation for the worst, I started to figure out how long we could survive if one of us does lose our job. Because we have two jobs, it’s very unlikely that we would both lose our jobs at the same time. This provides a little extra security. While we typically have 6 months of expenses, as I mentioned, I alone cover approximately 75% of our expenses. Based on my quick calculations (I don’t have it in me to do more than that – at least not until I know that we need to), we can make it well over a year.
I can’t tell you how comforting it is to know that we’ll be okay, even if she does go jobless. We’ve never had to touch our emergency fund yet, and while I hope that we don’t, emergency funds exist for a reason: everyone is at risk of needing them.