Longtime readers of this blog will know that I’ve wrestled with the idea classic emergency fund pretty much since the beginning of my financial journey a few years back. First I wondered if I needed one at all, then I decided to save $5000 over the course of a year, and I did and bored myself to tears with the boring-ness of it all, then I put most of that into the stock market and started over again on the cash savings, then finally this year I decided to do the 52-week challenge and have been genuinely enjoying that. But I think I may finally have come up with a real solution to my psychological e-fund woes.
The theme here is that I don’t like the static nature of most e-fund advice. The idea of getting it up to a certain amount through steady contributions and then just letting it sit there — it just doesn’t do anything for me. And then there’s the other problem, which is that I hate the idea of actually using it. I’d rather pay for a car repair or plane ticket out of cash flow or sinking funds, because once I get the e-fund to the predetermined amount, I don’t want to touch it.
However, it occurred to me last month that since the 52-week challenge has been working so well for me, I could just…keep doing it. Infinitely. Here’s my thinking:
- Instead of planning to put lots of $$ into an e-fund as fast as possible and then letting it sit there, I could instead plan to put in small amounts ($15-200/month) for basically forever.
- Then, when a car repair hits, I could pay for it out of the e-fund, and instead of trying to replenish the money immediately, I could just keep on paying in my scheduled small amount every month.
The idea is that I am never directing *too much* towards a dedicated efund, but I’m always dedicating *something,* so that when I use it, I know that the bucket will fill back up eventually without my having to find “extra” money to replenish it. With this method, I suspect that the e-fund will wax and wane, but will probably never get all that high — not high enough to be worth worrying that I should be doing something else with it.
Having come up with this idea I can already feel a shift in my attitude towards the e-fund account. It sounds silly, but it used to make me feel kind of nervous. How could I tell when enough was enough? How could I tell when something was an emergency that warranted use? How would I refill it if I had to use it for a major expense? Etc. But now it just feels like a source of money to be used when needed. Even though I’m transferring the money in there myself, it feels in my head more like a little spring that’s feeding a rock pool. I like the idea that it can be in recirculating motion, a source of comfort and support even though it’s not huge, but also something to be *used* rather than to just sit there.