Saturday, July 18, 2009

Having An Emergency Fund


I happened to catch Oprah last week when she had Suze Orman on (Recession Rescue with Suze Orman) and it was an interesting show! Love or hate her Suze has some good advice! I usually can't stand to watch her but the topic interested me. She now says that she recommends that if you have credit card debt that you only pay the minimum due! Yep, that's right! Instead of paying more toward your debt she wants you to put that money in your emergency fund. She also says that now instead of having a 3 month emergency fund you need an 8 month fund! Mainly because it's taking people up to a year or more to find a job these days.


I just found this so extraordinary that I wanted to bring it to your attention! Before all the financial experts would tell you to pay off your debt - become debt free and now it's pay the minimum on your cards (and of course don't keep using your credit cards) in order to be able to increase your emergency fund!


You know, I discussed this with some friends and some don't even know what their fixed monthly expenses are! So they have no idea how much money they would need to have in savings. Mind boggling to me! Some have husbands who handle the finances, but honestly, even if you're not the one to pay the bills you really need to know how much money you have in the the bank and what your monthly expenses are. I'm the one that handles the money in my family but I let my husband know every month what the state of our finances are.


Even if you think your job is safe it's good to be prepared for the worst because quite frankly I don't think anyone's job is safe these days!


Eight months of basic living expenses is a lot of money to most of us! So how do you start or add to what you have? Here are a few basic ideas.


Start small - if your budget only allows you to save $5 a week then save that. It really is better than not saving anything. Plus it gets you into the right mind set to become a saver. If you can save more then save more!


Sell stuff and then save the proceeds. Have a yard sale, sell on Amazon, ebay, Half.com, or Craigslist.


Re-think your essentials. Do you really need cable or can you watch tv shows on line for free (Hulu for one). Do you have to order a soda when you go out to eat or can you be just as happy with a glass of free water. Examine everything and really think about whether it really adds to your quality of life or whether it can go. If it can go save what you would have spent.


Start saving your change! It adds up fast and you can use those Coinstar machines to turn your change into dollars!




It's tempting to spend those refund checks, bonuses, and birthday gifts! Instead stash them into your savings!


Shop smarter for everything! From groceries to clothes to electronics to home furnishings.



Those are just a few ideas. So if you are currently one of the lucky ones that still has a job, I really think it's a good idea to ratchet up the savings account!


Here are a few more ideas from previous posts:



Save Money With Homemade Cleaning Products
Easy Cost Cutting Tips
Use It Up and Make It Do

33 comments:

Angie said...

Great advice! We definitely need to save more than we do. You never know what the future holds!

hip chick said...

Very good advice. My mom has been telling me to save for years and I sure wish I had been listening to her. I have started but things are so tight now that we can't afford to save very much. Well, every little bit adds up so we keep at it.

Ally0005 said...

We have talked about an emergency fund before and yes 8 months is a good start, took my husband 8 months to get a job and another 7 to get a better job.
I saw that show a while back and thought it was really good. I also heard can't remember where but if you have a lot of credit cards debt figure up an amount and pay that to the credit card one month and then put it to the emergency fund the next.

Ally

Terri and Bob said...

It is amazing how her advice has changed. I saw a show with her on Oprah helping this one couple survive a job loss and over 100,000 in debt. She was all about paying the cards off. It is a scary world out there.

Cindy said...

I am glad I got this info. filtered through you because I can't watch Suze more than 5 seconds, lol. My hubby does our finances but I'd like to give it a whirl. I know for a fact that I would budget differently. Great post!~Cindy

carolyn@primitive~devotion said...

Awesome advice! I take care of our financial stuff around here, and I really need to try to save more.

Anonymous said...

This is such good advice! We should all have 8 months savings to survive on. I still don't think it has hit the bottom yet, and we have so many friends who spent and spent and now have lost their jobs. Although most of the friends are highly skilled and educated, noone is really hiring, so you need the money to float you till the jobs come back a little. I think most took too much comfort in their skills or degrees and didn't prepare for the fact that if there isn't much out there, it doesn't matter how skilled or educated you are. Its hard times, we all need to look out for each other, and this good advice will help people prepare for that rainy day. I love your decorating, and get so many ideas that don't cost much. That is also helpful in tough times. Great Post! Have a good day

Brenda@CoffeeTeaBooks said...

You are absolutely right. When we had the financial reversal (being without work for a year can be called that), we had six months savings and still ended up using the equity in our house.

I've written before what I learned in that experience. Do not use your savings to keep up the standard of living you were used to (we just assumed he would get another job soon).

Storybook Woods said...

Yes, we all need to do this xoxox Clarice

Marla said...

Thanks Manuela for visiting my new blog, and for the comments. I still have so much to learn about blogging. If you have any advice I would love it. Thanks. Marla

glorv1 said...

My husband gets paid every two weeks so the first thing that comes out is a percentage for savings. I've gotten into that habit so it's easy now. Great advice Manuela. Have a great weekend.

Cyndi's Re-Creations said...

Great Advice Manuela! we have started on our emergency fund and it is building. we are no where near 8 months but its a great goal.
I have to say it feels good just to get a good start on that emergency fund. sure wish I would have known to do this about 20 years ago I thought if we were making our payments on time we were doing good. ha
Thanks again for all the good advice!!

Vee said...

Every day the paper is filled with more bad news about the economy. Unemployment rising way beyond what one would ever have expected. Hope that wiser heads prevail soon.

Stacey said...

Manuela, I just love to read your savings ideas. Occasionally I come and just read the back posts! You have such good and practical ideas. Keep it up girl!

Michelle said...

Great ideas, Manuela! This was a well-written post with lots of wisdom...thanks for sharing!

Enjoy your weekend :)
~Michelle

Nadine said...

Very good advice, thank you for sharing! It is very hard for us, as we are self-employed - therefor the income can vary so much! Dave Ramsey is also very good to listen to for money advice.
We have a huge coin jug that my husband drops his change into. We empty it out 2 times a year. Once at the 4th of July for our annual bbq & fireworks and the second time right before Christmas for presents. You would be amazed how quickly the coins add up!
Have a wonderful weekend Manuela!

Blessings!
~Nadine

salmagundi said...

I'm having a little trouble with that advice - not the saving part. With that I agree, but I still feel it's important to be debt-free. There must be a balance there somewhere. Suze is always interesting. Sally

sonyadawn said...

What great advice. I love Dave Ramsey, My husband and I taught he Financial Peace class at our church a few years back. Maybe I should get it out and review. Never can hurt to sharpen your financial skills.
Have a blessed weekend
Sonya

Joy said...

I know in this day and age if you have a job you are really lucky. Where I work I see more and more people coming in that have lost their jobs. Good tips!

june@craftyniche said...

We are following Dave Ramsey's 7 Baby Step plan on getting out of debt and investing for the future. We are on baby step #2 and will have debt #2 paid off next month. The next thing we will tackle will be our credit card and while we are doing this we still save each month. Not as much as we would like, but when we are debt free (beside mortgage) we will have a good chunk to save for 6-12 months worth of emergency savings. Can't wait for that day!

PAT said...

I'm the family bookkeeper. Being retired and on SS, with a little check from J's pension investments, we try to be frugal..especially since our life savings took a huge hit. We had it moved to a more safe place. We kept seeing our living bleed away, when it's gone it's gone.

We do have in the back of our minds, the possibility of trying to find work, if we need to...but we are not spring chickens and J has health issues...so not sure of the viability of that. Anyway...when I pay the bills and there are few, I made sure of that, before J retired last year. To go on...I tell J what is in the bank, savings, everything! He also calls our guy taking care of our money to make sure what is left doesn't go down the drain, at the rate it was going when we lost 4 years of income! Yep...even we retired folks got hit.
I still try to "put something away", each month, too.

Kathleen Grace said...

I can do Suze one better, don't get into deep credit card debt! Too late for some but it's never too late to stop spending for things you really can't afford. I don't know what we would have done without our savings account. Hubby has been out of work since last Sept. but we are fine because we didnt have debt and we did have savings.

Andrea @ Big Creek Cottage said...

Manuela...great post....I missed Susie O....I appreciate her sage financial advice.....and you for pasing more along.....

scrappy quilter said...

Great advice except I can't agree with not paying down your debt. We are debt free. No mortgage, no debt of any kind. Had we had debt when hubby couldn't work for 2 years, we would have lost our home and our vehicle. I do think you need savings, however not paying down your debt can be costly too.

It's not that we never had debt, we did. We started with getting rid of the cc and paying those off. Then we paid off our van and a huge tax bill. It took lots of sacrifice, however it's wonderful to have no debt.

Better yet is to not go into debt in the first place, if at all possible.

Manuela@Pleasures of Homemaking said...

I think her take is that you're better off letting your creditors wait than to lose your home. If you have enough in savings you can pay your mortgage, utilities and food. The credit card companies can wait. Whereas if you used what money you had to pay off your creditors, you wouldn't have money to pay your mortgage etc and it's more important to keep a roof over your head than to have your cards paid off at this point. She feels that when the economy gets back to "normal" you can then focus on becoming debt free again.

I agree, best not to have any debt but most people are not in that position and have to decide which to pay.

Manuela

shaybert said...

How timely. I am in the throes of developing my themes for my classes for the upcoming school year. I teach 3 sections of Personal Finance per semester (high school). I read a lot of "expert" articles about living in this economy. Dave Ramsey's site is full of great info. No matter who, the common thread is save! We have forgotten how to save. Our parents and grandparenst rarely used any financing and paid with cash because they... saved. By beginning to save, even just the $5 or $50 a week you are beginning a new habit which you can improve as time goes on. Have a goal. Here's a good article: http://articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/want-to-sleep-better-save-500-dollars.aspx
And my theme for the year:
Save Money so you Have Money.
Save Money so you can ....

Blessings, Shay

Rachel Phelan said...

Thanks for posting this. I couldn't agree with you more. I hate debt with a passion and made sure after I graduated college to tackle the debt that I unfortunately had and now aside from the mortgage, my husband and and I are debt free with about 6 months savings. I also keep track of our finances with an Excel spreadsheet. I have categories for our expenses and keep track each month of where our money goes and have a good idea how much our basic expenses are-food, gas, bills, etc. This way we know where our money is going each month. It's easy to spend $15 or $20 here and there and then before you know it, your money for the month is gone and you're pulling out the credit card.

My personal philosophy is if you have to put a purchase on a credit card then you really can't afford it and shouldn't be buying it in the first place.

Anyways, I love your blog, thanks for sharing your cute ideas.

Teresa @ Grammy Girlfriend said...

I am doing what Suzy said to do....and my married kids are also....Just blog hopping tonight and found yours. I have enjoyed reading it.. I love seeing all the different blog designs. Have a Happy Sunday!

http://teresa-grammygirlfriend.blogspot.com/

Jen R. said...

I am a huge Dave Ramsey fan and luckily have had an emergency fund for a while. It's such a comfort to have that back up i these hard times and when you really need something like a furnace or sump pump, to have that on hand!

Lady Katherine said...

I think this is great advice. Now I am so happy we do not have credit cards! Cut up long ago! We do have an emergency fund, and it is for a few months, and it is all in coins! It keeps growing thank goodness! I stay home too much and want to spend when I do get out! I bought new chickens and chick yesterday, I am so excited! They lay blue,green and pink eggs! I going to have some that lay an egg that looks like chocolate, later this year. Hubby put up an old coop for me. I not letting these be free range, I hope to get a chicken house soon. He used my old one for his stuff! I am complaining! lol for all the barns, sheds are took over! I just love fresh eggs, but the green ones are wonderful to eat, and better for you!

Cheri Peoples said...

Good info to know. It is a crazy job market. I so hope my husband can find a job once he finishes up this class.

Cheri
www.itssoverycheri.blogspot.com
FREE give away going on

Sharon said...

Thank you for posting this Manuela!

it is a good reminder to be good stewards of what we have. I look forward to checking out your related posts on the topic. Thanks for your wisdom, insight and encouragement :)

I hope you had a wonderful weekend!

~Sharon

Rambling Girl said...

I so agree with saving some...love the idea of order glass of water...I just started doing that the last few times I went out...I can not see paying 2.50 to 3.00 for a coke. I will not pay that anymore.