emergency fundOne of the most basic important things that you can do to improve your financial position is to create an emergency fund. The experts have been saying this for a long time and this is one instance when the popular saying rings true. As many of you will recall, my wife and I had to dip into our emergency fund months ago when I transitioned into my new job.

While a new job often means a surplus of income, this time it meant buying a second car within a couple weeks and that meant utilizing the emergency fund. This wasn’t the worst of emergencies. We still had a rough over our heads and two sources of income. But, the only way to buy a used car in a short time is to use some of that cushion.

One of the things that I have realized is that once you have an emergency fund, it makes you even less likely to use it. Maybe it’s because you know how hard it was to save up that much money or maybe because by saving up that much money you created the financial habits that reduce the odds of having to use that money. Needless to say, I found it hard to even scratch the surface of our emergency fund.

How We Built Our Emergency Fund

Many of the people I talk to tell me how long it took them to create healthy financial habits or practices. This wasn’t the case for us – fortunately. I was lucky enough to get a GREAT job my last semester in college. Those who know me know that I am quite ambitious. I often take on too much without knowing it is too much and then just power through it. This was no exception. I took a full-time job (actually, it was more than full-time) in my last semester at school. This was also the time that I was planning a wedding. The first week of my job I worked 70+ hours (as the semester started up).

While the job was quite intensive, it provided a HUGE financial cushion. I was given free on-campus housing in addition to free tuition and a decent paying job. For those of you who want to pursue a graduate degree, my first recommendation is to look for a job at that university. I practically had no expenses and more income coming in than I knew what to do with. It was more than I had made at any other time in my life.

I could have done a number of things with this surplus of money, but knowing that I was getting married, I stocked the money away as fast as I could. I didn’t have a paying job secured after college and wasn’t getting a degree that would secure me a high paying job. Knowing this ahead of time was enough motivation to build up a large emergency fund.

Things that Prevent You from Building an Emergency Fund

In case it isn’t already clear, I didn’t have the same obstacles that many others have when creating an emergency fund. Here’s a list of expenses that can get in the way of designating money for a rainy day.

Housing Costs – My wife and I live in one of the most expensive areas of the country. I can’t imagine how long it would take us to save up the same amount of money for an emergency fund now that we are paying so much for a 1 bedroom apartment.

Car Loan – Young adults, as a general rule, often make the mistake of buying too expensive of a car. On top of a depreciating asset, you also have an interest rate that makes the monthly payments outrageous. Try saving up extra money when you are paying for your expensive car.

Education – For the past 3-4 years, my wife and I have been paying for our graduate degrees. While we have ambitious financial goals, we have been slowed in our progress on them because of paying for school. I know just as much as anyone else the challenges that come with pursuing an education. Saving up extra money and storing it away for a rainy day will be slowed down if you are trying to pay for school.

Medical Bills – Another leading cause of financial challenges is unexpected medical bills. This country has a huge problem of over-charging for healthcare and while insurance can help to protect you from this, it’s not perfect. Hospitalization or surgery can leave a family with tens of thousands of dollars in bills. This is the reason you have an emergency fund, not to mention a significant deterrent from creating one.

The simple fact is that if you do not making saving an emergency fund a priority, the ordinary expenses of life will prevent you from accomplishing your goal. Having an emergency fund is important for anyone, regardless of how secure you think you are. You never know when you will need lots of cash. It may not be as easy as it was for me, but anyone can build up an emergency fund if you make it a priority.