PocketCoinage

The emergency fund is probably the most important savings account.  Think of it as self-insurance.  You save for an unforeseeable event: loss of income, furnace goes, or the roof springs a leak.  So how much do you need to keep in an emergency fund?  It all depends on your comfort level and what you are saving for.  You may even want to have different, targeted, emergency funds.  Some people recommend saving for at least 6 months of expenses.  Personally, with everything going on in the world, I would save for at least 12 months of expenses.  This will give you some flexible time to look for another income.

My current emergency fund is for anything at this point in my life.  Once I reach my ultimate goal of $20,000, I will set this account aside and name it the “Loss of Income Fund”.  The $20,000 will keep my current lifestyle afloat for about a year.  I may even open short-term CDs to make some more money rather than letting it sit at a lower interest rate.  To keep my savings on track, I could direct the money a few ways:

• Keep putting money into the “Loss of Income Fund” after I reach my goal
  • Every $1,000 I go over my goal, a 1-year CD gets opened
• Create a new emergency fund targeted towards another goal
  • Maybe an “Emergency Home Repair Fund”?
• Send it to another savings account for non-emergencies
  • Vacation fund
  • Auto fund
• Save more towards my Roth IRA

I also use my emergency fund for when I overspend on my credit card the previous month.  I refuse to maintain a balance on my credit card unless I have no other choice.  Most of the items are unforeseen expenses and this is where it is very nice to have a fund to tap into.

Do you have an emergency fund?  How do you use it?

As we begin a new year, many people are making commitments to change themselves or to do more for others.  Unfortunately, many of those commitments will be soon forgotten.

To start this year, I’m creating a few goals for myself – something I’ve never done.  I usually have different aspirations throughout the year and try to meet them without the time constraints.  Sometimes good things take longer than anticipated; do not lose sight of your goals!  I keep reminding myself that and push along.

• Spend more (much more) time with family and friends
  • It’s the people around you that make life fulfilling.  I want to have more breakfasts with my grandma, more dinners with my parents, and more fun with my girlfriend and friends.  Work and the house consumed me last year.
• Have $20,000 in an emergency fund
  • When owning a home, you never know what might need replacing.  A new furnace could cost around $10,000 depending on the one you choose (or need).  I’m currently halfway there!  I will try some other methods of getting there besides my bi-weekly contributions; not sure what those methods will be yet.
• Complete a few home improvement projects
  • Expand the vegetable and flower gardens
  • Build a deck
  • Complete the 4-season porch
• Make my home more efficient
  • The United States Government currently has a tax credit for 30% off the cost of making your home more efficient (up to $1,500 back).  To take full advantage of this credit, you need to spend $5,000.
    • I will re-insulate the attic and crawl space.
    • I may upgrade the hot water heater to a tank-less one.
    • I may upgrade my heater and/or central air unit.

• Become an entrepreneur
  • I feel the freedom of running my own business would be well worth the effort put in.  This “good thing” will take some time to start up.

I’m sure I will have more goals to add to my list throughout the year.  Let’s see how many I will reach (or add)!

What are your goals for 2010?  Were you able to keep any of your goals from 2009?  How did you do it?