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Abstract

959">An emergency fund is exactly what it sounds like: a cash reserve for emergency situations, such as:</p><ul><li>Job loss (the biggest emergency due to loss of income)</li><li>Car accidents with hefty repairs</li><li>Injuries and costly medical bills</li></ul><p id="27bb">Here’s another way to think of your emergency fund: it represents the amount of time you can live without income.</p><p id="ec21">Keep your emergency fund in a high-yield savings account. These accounts are easily accessible and offer better interest rates than typical checking and savings accounts, so you’re earning passive income at the same time. <a href="https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/">Here’s a list of the highest interest rates as of March 2020</a>.</p><p id="c677">I’ve earned hundreds of dollars of interest from my account with Ally. They had the highest rate at the time and I liked their platform — but pick the option that works best for you. Marcus by Goldman Sachs is a popular one as well.</p><p id="95ba">You should keep approximately six months of expenses in your emergency fund (that’s where the budget comes in handy). If you live a pretty frugal lifestyle and you’re comfortable reserving less (like 3–5 months), that’s fine too.</p><p id="a459">Your emergency fund should never be used for anything else — not for groceries, not for Netflix, not for booking a hotel. That’s not what an emergency fund is intended for.</p><p id="8174">An emergency fund is an absolute must-have. But it’s only one pillar of your financial foundation. If you want to get your finances totally organized, check out this <a href="https://readmedium.com/get-your-finances-organized-ea4f4554b156">post</a>.</p><div id="d380" class="link-block"> <a href="https://readmedium.com/get-your-finances-organized-ea4f4554b156"> <div> <div> <h2>Get Your Finances Organized</h2> <div><h3>Stop stressing and clean up your money.</h3></div> <div><p>medium.com</p></div> </div>

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    </div><h1 id="cfb4">The invaluable gift my emergency fund gives me</h1><p id="f548">Peace of mind.</p><p id="8cdf">Don’t get me wrong, I love interest income too. But my emergency fund keeps me sane. Before I left the corporate world in July 2019 to pursue freelance writing, I established an emergency fund and set aside an additional 12 months of expenses to serve as my runway (assuming I made no money).</p><p id="b62e">Together, my emergency fund and my runway give me the gift of peace.</p><p id="0384">Although I’ve landed clients and established stable sources of income since then, I know that I’m covered if I ever stop getting gigs. Whether it’s a global pandemic that causes companies to cut back on their marketing budgets or something else, it doesn’t matter.</p><p id="1897">I’m prepared.</p><h1 id="1af8">Is it too late to create an emergency fund?</h1><p id="60f6">No, of course not. It’s never too late.</p><p id="223f">If the global pandemic and societal response teach us anything, it’s that we have to be financially prepared for the unexpected. Plenty of people are facing a period of undue financial stress right now. Not everyone has the luxury of remote work.</p><p id="3fe3">A pandemic is an extreme example (fingers crossed we won’t experience another one), but it illustrates the need for an emergency fund. There will always be another costly event to prepare for.</p><p id="efe6">Hopefully, that event is far in the future for you. In an ideal world, nothing bad will happen and you’ll never have to shoulder a large financial burden.</p><p id="e516">But, you should always be prepared.</p><p id="c0b1"><i>Do you want to learn more about personal finance? But without the complicated jargon and dry explanations? Sign up <a href="https://baconbits.substack.com/"><b>here</b></a><b> </b>for <b>Bits </b></i>— <i>our personal finance newsletter.</i></p></article></body>

How My Emergency Fund Is Keeping Me Sane During the Pandemic

And everything you need to know about starting an emergency fund.

Are you prepared for a huge unexpected cost or unpredictable event (like being unable to work)?

Given the current state of affairs, it’s more important than ever to establish an emergency fund.

You don’t know what the future holds, but you can (and need to) be as financially prepared as possible.

Coming out of college, I didn’t know jack about personal finance. I thought I knew a little bit, enough to get by — but I was wrong.

Nine months into my corporate banking job (early 2017), my personal finances were still a mess. Sure, I was making a healthy, stable income and saving a little bit each month (which, some would say, is all you really need in life). But I was committing several financial sins:

I wasn’t saving enough
I wasn’t saving the right way
I wasn’t investing

You could argue I deserved a “pass,” so to speak. We all deserve a pass from time-to-time, right? I was adjusting to my first real-world adult job and climbing a steep learning curve. So, I pushed my personal finances to the back burner.

But hey, better late than never.

So, how did I get my finances together? I started reading about personal finance to develop my financial literacy. I read blog posts, articles, and books. I watched video after video. I got advice from financially literate people with decades of experience.

Besides creating a budget, there was a clear first step to organizing my finances and reaching financial stability.

An emergency fund.

What is an emergency fund?

An emergency fund is exactly what it sounds like: a cash reserve for emergency situations, such as:

Job loss (the biggest emergency due to loss of income)
Car accidents with hefty repairs
Injuries and costly medical bills

Here’s another way to think of your emergency fund: it represents the amount of time you can live without income.

Keep your emergency fund in a high-yield savings account. These accounts are easily accessible and offer better interest rates than typical checking and savings accounts, so you’re earning passive income at the same time. Here’s a list of the highest interest rates as of March 2020.

I’ve earned hundreds of dollars of interest from my account with Ally. They had the highest rate at the time and I liked their platform — but pick the option that works best for you. Marcus by Goldman Sachs is a popular one as well.

You should keep approximately six months of expenses in your emergency fund (that’s where the budget comes in handy). If you live a pretty frugal lifestyle and you’re comfortable reserving less (like 3–5 months), that’s fine too.

Your emergency fund should never be used for anything else — not for groceries, not for Netflix, not for booking a hotel. That’s not what an emergency fund is intended for.

An emergency fund is an absolute must-have. But it’s only one pillar of your financial foundation. If you want to get your finances totally organized, check out this post.

Get Your Finances Organized

Stop stressing and clean up your money.

medium.com

The invaluable gift my emergency fund gives me

Peace of mind.

Don’t get me wrong, I love interest income too. But my emergency fund keeps me sane. Before I left the corporate world in July 2019 to pursue freelance writing, I established an emergency fund and set aside an additional 12 months of expenses to serve as my runway (assuming I made no money).

Together, my emergency fund and my runway give me the gift of peace.

Although I’ve landed clients and established stable sources of income since then, I know that I’m covered if I ever stop getting gigs. Whether it’s a global pandemic that causes companies to cut back on their marketing budgets or something else, it doesn’t matter.

I’m prepared.

Is it too late to create an emergency fund?

No, of course not. It’s never too late.

If the global pandemic and societal response teach us anything, it’s that we have to be financially prepared for the unexpected. Plenty of people are facing a period of undue financial stress right now. Not everyone has the luxury of remote work.

A pandemic is an extreme example (fingers crossed we won’t experience another one), but it illustrates the need for an emergency fund. There will always be another costly event to prepare for.

Hopefully, that event is far in the future for you. In an ideal world, nothing bad will happen and you’ll never have to shoulder a large financial burden.

But, you should always be prepared.

Do you want to learn more about personal finance? But without the complicated jargon and dry explanations? Sign up here for Bits — our personal finance newsletter.