My e-fund currently stands at a grand total of — wait for it — $51, after an automatic end-of-the month transfer from checking to savings.
Yup, that’ll get me through anything!
Meanwhile, I’ve been directing massive amounts of incoming cash at my student loan, because I was/am bound and determined to get it paid off by the end of this contract, almost a year to the day after I defended my dissertation. I could easily fund a $1000 e-fund at the end of this month (or could have done it anytime in the last few months) by simply delaying debt repayment, and since interest on the student loan is now down to about $13 a month, I don’t know, maybe I should do that. Damn it, that’s $13 that could go somewhere else, though, like, say, to an e-fund, so….
Here’s my reasoning:
1) My e-fund-like efforts in the past have always disappeared quickly; I’d get them built up to a few thousand dollars and then either be unemployed for a while (I was a freelancer) or spend the money on a few trips or credit card payments after I ate out too much or bought new clothes or whatever. I am committed to budgeting more responsibly now that I am, oh my God, 35, and not 22 (not that I should have been doing that when I was 22, but water under the bridge) but I’m still worried that if I put together an e-fund I’d be tempted to dip into it for less than emergency expenses, and meanwhile the remainder of the debt would still be sitting there. If I kill the debt first, however, it’s killed.
2) I’m single and have no children or, for that matter, pets. That is, other living beings are not relying on my steady income (and a good thing too.) So, if a serious, big-time emergency strikes (I get hit by a bus) I at least won’t be putting anyone else in danger.
3) Meanwhile, for a minor emergency, I have an ungodly amount of unused credit — over $30,000 available on the four major credit cards that I have open.
3.5) Also, since I don’t own a house, the number of minor emergencies that could come up are reduced (no random exploding boilers or whatever.) Pretty much it comes down to unexpected car repairs and unexpected medical bills.
4) I could also call on my parents — I would never do that for anything less than a true, serious emergency, and I wouldn’t be likely to at all. Like, say I needed a plane ticket for a funeral: I’d rather put it on the credit card and pay it back in pieces. If I do end up asking my parents for help, it’s more likely to be in the form of free housing, should my tenuous hold on an academic career finally slip away. However, at the end of the day, I could ask them for an interest-free loan and get it, if I really needed it for some reason.
5) There is basically no chance I’ll randomly lose my job during this coming year. I have a guarantee of 13 months of income, so while I do want to guard against being unemployed in the future, I don’t need to worry about it in the imminent way I might if I worked in a normal job.
So the upshot is that I’m afraid of my own past bad habits and I’m not that afraid of handling emergencies with the non-cash resources I do have. I want that debt gone though — because one thing I really am afraid of is potentially entering a period of unemployment (13 months from now) while still in debt.
All that said, I do think I should have a bigger e-fund. I’d like to aim for $1000 to start, then maybe gradually ramp it up to $3000. But I don’t think I’m going to make it a priority over other savings goals. I couldn’t possibly get it large enough to really live off for six months or a year, so there doesn’t seem much point in having a relatively huge one when instead I could be directing money towards other priorities. I’ll talk more about this in July when I have a better sense of what exactly I’m going to make every month, though. Until I get my first paycheck I only have a ballpark idea of what it’ll look like after taxes, insurance, retirement contributions, etc.
What are your thoughts on e-funds? I know most people are making it more of a priority than me so I’m afraid I’m overlooking something.