Tag Archives: emergency fund

What If: A Month Without Pay

The government has reopened!  But my heart goes out to the many people who went more than a month without pay.  Yes…they are going to be paid now, even if they were furloughed during the partial shutdown.  But that doesn’t take the sting out of not having the money when expected.

I, like so many, live paycheck to paycheck.  I have a tiny bit of savings, a really tiny stock portfolio, and a retirement fund.  I do not have the recommended three-to-six months of expenses tucked away in an emergency fund.  If I were to have to go without pay for a month I would be up the proverbial creek without the requisite paddle.  I suppose it could be worse.  My parents would probably be able to float me a loan.  Or I could borrow against my retirement savings.  I have credit cards I could use.  But none of these ideas appeals to me.  I’m 51 years old.  I’m supposed to have a strong understanding of money.  Yet here I am without emergency savings.  I’m flying without a safety net, mostly because I never thought about the fact that I might someday fall.

The government shutdown has really brought the importance of a contingency plan to the forefront.  What would you do if you found yourself without anticipated income for a month.  Would you be able to keep yourself afloat?  Do you have somewhere to turn for short-term help?  It’s always good to have a backup plan in place.  We never want to think about the worst case scenario.  But it could happen.  And you should prepare for it just in case.

Surprise! It’s a financial emergency!

Sometimes life can catch you off-guard with a big financial surprise.  For me it was an unexpected major (read: expensive) repair in order to make my aging Subaru pass inspection. (For those of you new to Pennsylvania, the Commonwealth requires a pretty extensive annual inspection on automobiles.)  For many law students it was a technological breakdown in the computer communications between Penn State and the Education Department that delayed the disbursement of Federal Graduate PLUS Loans, which in turn delayed living expense refunds.

Being caught off-guard without enough money is never a pleasant experience.  You may find yourself making calls to delay bill due dates.  You could face overdraft charges.  You may have to take on credit card debt.  You could have to borrow from family.  You might need to dine on ramen more frequently than is appetizing.

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The ideal solution, of course, is to have an emergency fund.  A savings account that you can tap into in situations where you unexpectedly come up short.  If you don’t have an emergency fund…now is the time to start one.  It’ll start small and grow larger over time.  And eventually, what would have been a financial emergency in the past is just an inconvenience that takes money from your emergency fund.  Ideally, your emergency fund should be large enough to fund three to six months of your living expenses.  But the world isn’t ideal, so if you could set aside a minimum of $1,000, that’s at least a decent cushion.

But what do you do until you have your fund established?  That’s when you have to leverage your own financial flexibility.  Maybe that involves family who can help.  Maybe it involves credit cards.  Maybe you have to sell something.  Maybe you just have to fend off your creditors for a short time (don’t ignore them…ask for extensions!).  Only you know where your own financial flexibility lies.  The important thing is that when the unexpected happens, you know what resources you have available to help you handle the situation.

And hopefully we’ll never have to deal with another Grad PLUS Loan disbursement delay!

Bumps in the Road

In January I started the Couch to 5K program, hoping that I could be ready for the Race Judicata to be my very first 5K run.  C25K is a nine week program.  And this week I am doing week 6.  For the fourth time.  I just can’t seem to be able to complete it.  I’ve talked to some runner friends and they tell me that I’ve hit a bump.  I just need to keep working on it and I’ll eventually get past it.

Life is full of bumps.  The week during your diet that you gain weight.  The class that you expected to ace that you end up with a much lower grade than anticipated.  The day your fun plans are de-railed by a snow storm.  Bumps happen.

Bumps happen a lot in the financial world.  The unexpected car accident.  The surprise medical bill.  The compromised credit card.  The bill that got lost and went unpaid until after the due date.  There are so many things that can play havoc with your financial life.  This is why it’s important to have some kind of contingency plan.  An emergency fund in a savings account.  A line of credit that you can tap into.  A relative who can float you some cash.  Having a contingency plan definitely makes it much easier to get past the bumps.

Life is full of twists and turns and bumps in the road.  And getting past those bumps will require some effort on your part.  You may need to work hard, back up, and try again to get over the bump.  You may need to make new plans to work your way around the bump.  But the important thing is to keep moving forward.  Bumps will happen.  But they don’t need to stop you.