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Last week I took our 2003 Honda CRV in for its 75,000-mile checkup expecting about $150. I left $500 poorer. Don’t ask what all was done — once a car racks up miles, things start to wear out. Still cheaper than buying a new car.
This week my daughter, Carina, got a flat in the 1998 Isuzu Trooper we share. I figured a $25 patch would do it. Nope — the tire needed replacing, and the bill came to $160. This month’s Visa statement also included plane tickets for a financial bloggers’ conference and cross-country travel to see family. The travel wasn’t an emergency, but it pushed our monthly costs up. Add new furniture for Carina, who’s moving back for grad school, and the bills shot through the roof.
Car repairs and some travel are hard to predict. We have a car-repair budget, but timing is the unknown. The same goes for other periodic expenses: we pay car insurance twice a year, so January and June require extra cash, and a burst pipe can demand immediate funds. No one’s monthly expenses are identical every month — that’s why you need a financial cushion.
If something major happens — job loss, legal trouble, medical bills — an emergency fund is essential. For months when expenses exceed income, you still need savings to cover the gap. Research even links having an emergency fund with better mental well-being.
Here’s how to start building one now:
– Open a separate savings account just for unexpected expenses, apart from long-term goals.
– Ask payroll to transfer a set amount from each paycheck into that account. You’ll need the account and routing numbers (your bank can provide them or you can find the routing number on your checks).
– If you can only spare $50 per paycheck, start with that. The point is to begin; you can increase the amount later. Look for banks offering decent interest rates.
Make saving a habit and resist dipping into the fund for routine spending. If you’re consistently spending more than you earn, reduce expenses or pick up a side hustle to bring in extra cash. If you do nothing, nothing will change.
Ideally, build the fund to cover several months’ salary, but even a few hundred dollars can reduce stress. Use it only for unforeseen expenses instead of charging them to high-interest credit cards. Expect setbacks, but keep contributing regularly and withdraw only when truly necessary. As your fund grows, so will your financial confidence.
If you struggle with overspending, use cash for purchases or pay credit-card balances in full each month. Picture how much better you’ll feel with a cash cushion.
Do you have an emergency fund? How do you build it, and what do you use it for?
