Goodbye Emergency. Hello Life.

There’s a billboard in our town that says “Goodbye Emergency. Hello Life.” Can you guess the product being advertised? (Go ahead … I’ll wait … )

It’s pitching an emergency room. I have to say, my mind reels when I wonder how that slogan can rewrite the scripts carved in my brain by years of emergency room experiences. They want me to have a sense of calm associated with the emergency room, huh? I’m afraid that’s going to require more than a catchy slogan, like maybe a miracle.

But I appreciate their approach so much that I’d like to try it with a financial planning strategy by the same name: the emergency fund.

When it comes to building your emergency fund, you are striving to get to the place where you can say “Goodbye emergencies. Hello life.” That is exactly what this fund does.

Even if you only have $1000 set aside, it can take away the sting of unexpected expenses under $1000.  Anything you save today brings you closer to your goal than you were yesterday.  So there’s no shame in starting small. The purpose of having this money available is removing the “crisis” status of the event and demoting it to another cost of this thing we call living. Not an emergency. Just another expense.

The emergency fund boasts more than an emotional impact on your financial life. Some people complain that having money in savings is a bad move these days since interest rates are so low. What if I told you an emergency fund could save you 18%? For those who have only an emergency fund for savings, having money earmarked for the unexpected means you won’t need to put an emergency on a credit card. With the average credit card interest at 18%, an emergency fund prevents you from having to pay that interest.

The best practice is to build your emergency fund up to 3 – 6 months of living expenses. Obviously, we’re accounting for major emergencies – like losing a job – in addition to the minor “Whoops, I forgot to open the garage door before I backed out” variety. For some women, life is a roller coaster. Maybe you have an unsteady source of income, poor health, or a Lucy Ricardo tendency to always get into trouble. For you daredevils, six or more months of expenses should be set aside for emergencies. At the other end of the spectrum are women whose lives are more carousel than coaster. For you, three months will do.

Now all of this is easy to say – “Just build a savings fund for emergencies,” but it’s not so easy to implement. First, you have to save. For some of us, this is a new discipline to cultivate, but the rewards are staggering. I encourage you to let someone hold you accountable in your intention to establish this fund. Contrary to the cultural taboos that say you shouldn’t discuss money, I believe it’s time to start a new conversation. You don’t even need to mention a dollar figure as you communicate your intentions. But a friend, family member, or trusted advisor asking about your follow through can make a big difference in your self discipline. Remember, there’s no shame in starting small.

Would you believe that saving is not the hardest part for me? Indeed, I am a miser of the most extreme kind. For me, the tough part is spending the money on emergencies. My emergency fund is such a comfort that I would rather put the unexpected costs on a credit card than obliterate my security blanket in the bank. From a rational, financial perspective, I’m completely backwards. But in the grand scheme of things, maybe it’s worth some of my extra cash to sleep better at night. And I’m not alone. A lot of women need a “buffer” fund, designed to do nothing but sit in an account and never be spent. A buffer serves the purpose of staving off financial anxiety-induced insomnia. If that’s what makes you feel more secure, just build an buffer fund on top of that original emergency fund. It never hurts to have a little extra in savings.

If you are the type who can sleep just knowing extra money exists, and in your mind it doesn’t have to be readily available or liquid, then your buffer can be invested in a portfolio. That way you’re not sacrificing potential growth. You are acting in a way that is both financially wise and emotionally mature. It’s the best of both worlds.

Regardless of where you are in your financial journey, embrace the security blanket that is an emergency fund. Because you are ready for it, your next crisis becomes just another life experience. Crises are hard enough without the financial meltdown they can invoke. So strip them of some of their power and say “Hello life.”

If all this talk about emergency funds makes you wonder if you could improve the handling of your finances, let’s chat. It could make a big difference in how well you sleep at night.