Debt Free Diva Blog



Funds for when you say Oh Sh!t!

Let’s talk emergency funds! Seems like such an ambulance-at-the-bottom-of-the-cliff topic right now, doesn’t it? The emergency has happened and here we are now, so what will the emergency fund change? Well, simply put, everything!

When I started my debt-free journey, I didn’t have an emergency fund. I thought exactly the same as what you might be thinking right now.

I was already in the debt and had this mammoth task ahead of me. My emergency was happening already.

Because let’s face it – nothing else can go wrong… can it?

I’m sure that the one thing that 2020 has taught us is that there is always something (or something else!) that can go wrong!

In those first 12 months I didn’t have an emergency fund at all, rather choosing to keep using my existing lines of credit every time something came up. This meant that I was digging myself into even more debt every time something went wrong.

Now that I look back on it I realise just how bad this was for me and how it was really damaging to my spirits. It always felt like I could never get ahead because whenever I was close to paying off the next card I would have something happen like a car repair, or a vet bill or some other unforeseen circumstance. Just something that made you say ‘oh Sh!t, not again!’

Around April 2018 I was first introduced to the concept of an emergency fund and boy oh boy did it change my life! I very quickly changed my financial plan to include this simple concept.

I decided that an appropriate starter emergency fund for me at the time was $1000. Single with no kids, would be enough to cover anything that came up that made me go ‘Oh Sh!t’. So, I diverted all additional payments into this fund to build it up and it just sat there earning interest (back in the day of high interest earning accounts).

From April 2018 to November 2019 I used my Oh Sh!t fund on three separate occasions:
1. The time Teddy ate sand and had to go to the overnight vet (which her insurance paid back most of later)
2. When I was trying to sell my BMW car and it blew up meaning it needed repairs before I could sell it
3. And the stereo on my Swift broke and let off a high-pitched squeal that was impossible to drive with.

As I developed through my financial journey (and became debt free) I was able to save a larger emergency fund of $3000 to cover anything larger as this made me feel a bit more comfortable and stable. Then Covid 19 hit and I decided to go all out and save six months’ worth of expenses as an Oh Sh!t fund because the situation was just changing so fast.

So now I have two Oh Sh!t funds – one with $3000 in it and one with six months’ worth of my expenses in it. I have chosen to differentiate mine to separate the short- and long-term emergencies (and to keep the finances separate).

In this current climate I think it’s the best time to set aside even one month’s worth of expenses – because we just don’t know what is around the corner just yet. Maybe now is a good time to evaluate and see if you can save $1000 or one month or even six months’ worth of your expenses.

Imagine the peace of mind you would have if you knew that if something happened the made you go Oh Sh!t, you could use your cash reserves to make it better rather than take on extra credit or falling behind on bills. It’s a good feeling isn’t it?

If you need a visual aid to help with your emergency fund, simply click here to head over to my debt free trackers.


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