7 thoughts on “The Emergency Account

  1. It’s scary once you think of it, having to think about putting away for an emergency just after empting your bank account for such an investment like a new home!! Which then makes us think about those ‘what if’ situations which would then cause us to have to draw on this ’emergency account’. I think what most people are scared about is the ‘what if’ and not having enough money to support that ‘what if’ situation if it should occur.

    But as we know (and even according to Murphey’s Law) ‘anything that can go wrong will go wrong’ and the reality is we have to plan for this.. and a good way is to have some money automatically deducted from our chequings account every pay period into an emergency fund (perhaps a high interest savings account) and work toward that (monthly expenses x 12) goal… and just pray to God that nothing happens before that time 😉 !

    Great discussion,

    New Home Owner — who really digs this advice
    Mo

    1. Hi Monique: It is scary to think as soon as you have made the single biggest purchase of your life that you have to turn around and begin saving for just in case something goes wrong. We have to deal with Murphy and his law which makes it very frightening, without planning for Murphy when shows up which we all know he will. What can we do if the plan is not in place, where do we go to take care of that emergency? If while building that emergency account something happens that requires money to fix it, the emergency account can then be used instead of the proverbial credit card or line of credit. The automatic transfer from chequing to the emergency account keeps going, the emergency has been fixed and the credit cards or line of credit have not been use. Monique take a look at a previous post titled “The debt Spiral” No emergency account debt grows and grows whenever Murphy shows his face

  2. Hmmm!!
    The burdens are onerous but appear to be achievable –
    So let me get this right
    A good finance plan has the following Monthly payments
    Emergency Fund $200
    Savings Fund – $50 (arbitrary)
    Car maintenance and payments $$600
    Mortgage $900 (arbitrary – sounds lke a cheap house)
    Property Tax $400 (arbitrary – probably north or east of Toronto for such a low rate)
    Retirement Savings $200
    Entertainment $100 (cheap dates)
    Food $700
    So far – to cover these expenses I would have to earn $3150
    Or about $40,000 take home pay after taxes to cover the above.

    Please comment on the amounts – what am I missing??
    C

  3. Hi Curtis, Great I love having these comments, thanks for taking the time. Let’s start with your choice of words, they are indeed scary, BURDENS, ONEROUS, ARBITARY, CHEAP HOUSE, CHEAP DATES, I am ready to run for hills thinking these words are chasing me down to conquer me in the bottomless pit of struggle. Curtis your plan does need some work; it is balance, you have allocated every penny that comes in your spending plan great job. Your savings Curtis, you said $50 (arbitrary) the dictionary defines arbitrary as….random…capricious…despotic, further capricious…..subject to whims, your savings have to be one of the very first things in your spending plan, treat it like a debt you owe yourself and stick to it no matter what, certainly not a whim. Car payments and maintenance should not be so high especially after just buying a new home, the car payments should be down to “0” as a new home buyer. How did you come to the amount of $200.00 for your emergency savings, over what period? Yes Curtis because of the advantage of low interest rates some mortgages can be that low without the house being that cheap. Although the property taxes are a bit high for some parts of the city it is still in line. Retirement savings great, entertainment will do after all you are a new home owner. How many people in your family? Your food plan is a bit high.
    What worries me more Curtis is that you have not allocated any funds to pay for…..Heat, Hydro, Water, Telephone, Cable, Internet, Home Insurance, and life insurance? Your plan like all new plans require going over a few times, spending plans have to be adjusted several times before they become practical. Spending plans should never be cast in stone because they need to be revamped as your life cycles changes. Let me see your new revised plan, and please Curtis do not pull your hair out.
    Remember your formal education was not completed in one week.

  4. Hi ,
    I am finding it a little challenging to grow my emergency account (which i call a contingency account) to 12 months expenses, I save a few hundred dollars but i keep having to go into it when i need to fix my 10 year old car. This year I used it 3 times and now I started growing my contingency account again. I am thankful that i dont have to use credit to fix my car and I dont have a car note but two of the main reason for having a contingency account is incase I get laid off and another to pay for any repairs on my car.

    Great reading your blog
    Kerry-Ann

    1. Hi Kerry-Ann
      It is challenging to begin an emergency account and it is often so hard to let it grow but think what would happen if you did not have an emergency account to turn to when your car broke down, you would have yourself caught in the Debt Spiral and going nowhere. Stay focus on working on that emergency account, the idea is to have money in that account to take care or your emergencies instead of using a credit card or line of credit. Make sure that the money is being trnsfered into the emergency account automatically. Good Luck

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