Today, after years of saving, I finally have my six-month emergency fund (aka my BIG ER Fund) fully vested. For me, it's a huge accomplishment but, even more, a sense of relief that I have a security blanket should something happen. When I say it took me years to save it up, I do mean years. I've talked about it in length before, but I started in my 30s saving a mere $5 per paycheck upping the amount when I could over time. For the past few years, I've been adding a little over $250 a month to it.
What will I do with the extra money now? Well, now that I had to sign up for my own insurance again (I got a long period of insurance from my ex-spouse in my divorce settlement), a rent increase in May when my lease renews, and the cost of inflation, I will add that money back into my cash flow to make up the hits to my budget from these items.
In addition to my six-month emergency fund - which is split up between two high-yield online savings accounts - I have two other savings that I use to stave off ever dipping into my BIG ER Fund. One is my regular savings account at my everyday, local bank and the other is my checking account buffer (or CAB as I refer to it). I have a month's worth of expenses tucked into my regular savings account in case I need it. My CAB is a simple process by which I deduct $10 per paycheck from my checking account balance. It doesn't go anywhere but I pretend like it doesn't exist, although I do keep track of it on a ledger sheet.
These different types of ER funds I have are my three lines of defense against minor and major problems. Here's how it works:
1. CAB: If I have a monthly bill that's higher than my budgeted amount (looking at you, electricity bill) or I miscalculated what I might need, for example, I can pull from my CAB. I don't need to pay myself back for that, but rather I will just keep adding $10 to it each paycheck.
2. Regular Savings: If I have a bigger unexpected expense or need than my CAB can handle, I have a month's worth of expenses saved up in my regular savings account. Also, if I were to become unemployed, I'd have a month of bill money in hopes that I could find a job within a month so I wouldn't have to start pulling from my BIG ER Fund. If I do borrow from this I have to pay it back at a certain amount per paycheck.
3. Lastly, my BIG ER Fund is there strictly in case I lose my job. If I never lose my job, it will be used for retirement.
This past Fall, I finally figured out that I needed to be saving in advance for certain items and came across the concept of Sinking Funds. Sinking Funds, for those of you who don't know what they are, are monies you set aside for future purchases. My credit union allows me to open and nickname as many savings accounts as I want, so I set up six savings accounts in addition to my main savings account. They are:
Insurance and Phone Fund
I save a bunch of money by paying my car insurance six months in advance, my phone bill six months in advance, and my renter's insurance a year in advance. Instead of scrambling to come up with that large amount when the bill comes due, I calculated the cost per paycheck and put that amount in this sinking fund each time I get paid. When the bill comes due, it's paid automatically by one of my rewards credit cards and I pull the money from the sinking fund to pay the card off.
Clothing and Gifts Fund
I have a growing teenager who needs new clothes a few times a year. I also need clothing here and there and sometimes I need to buy a gift for some reason (mainly for Christmas) so I put money aside in this sinking fund each paycheck.
This is money for oil changes, new tires, and covers the cost of the plate & registration renewal each year. I do have a new car under warranty, as a side note, so I don't have to save a large amount.
Health & Beauty
My face products and makeup cost a fair amount of money, more than my standard Household Supplies category can support, so I put a small amount in this sinking fund each time I get paid.
As you're all well aware, I love to hike, camp, and backpack. Gear costs money and I have my eye on better gear in the future. So, I save a little each paycheck towards this goal.
Last, but surely not least, I put money in this sinking fund every payday...for obvious reasons.
Side hustles get talked about a lot on the internet. Trust me, I've watched and read lots of articles about side hustles, both positive and negative but they're not really something that I'm either keen on or can do...for various reasons.
However, I do *technically* have a couple of side hustles. The first one is babysitting. I babysit about 4 times a year for a family with three kids. They go to bed early and I make $5/kid/hour. It's not lucrative but does add a bit of spending money into my pot. The second one is credit card churning, something I've discussed a few times before. I make part-time job money without having to work the part-time job. Today, in fact, I just received a direct deposit (that went straight into my Travel Fund) for $224.55. If you're interested in credit card churning, check out this blog post I wrote or this one. Last, with the decent interest rates you can currently get with high-yield savings accounts, I'm pulling in over $30/month in interest on my BIG ER Fund.
I hope you're inspired to make a few financial changes or shifts. If you have questions, shoot 'em in the comments below.