$1000 Emergency Fund….Now What?

One of the basic ‘rules’ of personal finance is that you need to have $1000
in easily accessible cash in case of an emergency. I have been slowly
building up savings and set up a sub account in ING specifically for my
emergency fund so that I would know when I hit that magic number.

I finally reached the savings goal of $1000 in ING in my emergency fund and
while I am happy that I got to that goal I am now bored. What do I do now
that I have reached the fully funded $1000 fund?

My plan is to continue working on my debt so that I can get my car loan paid
off as soon as possible. I will therefore take the money that I had
previously been sending to the emergency fund and put it towards the
snowflake fund so that I can really whittle that debt down.

Author: Lulu

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17 Comments

  1. Congratulations!

    I have been wondering and looking around on the web for how much to save in eergency fund, and conventional wisdom says that we should have at least 6 minths worth of basic unavoidable spending/expenses – (expenses such as rent, insurance, health copayment, telephone etc.) and some sites even say to go as far as 9 months or upto 1 year’s worth of expenses.

    Depending on the fallback plan you have – i.e. parents, savings bonds etc, you can set your goal. So you can start focusing on oaying off your debts and then continue building the emergency find. You can also start a ROTH IRA, and start staching money there — so , there you go, that should give you a new goal..

    Also, there are other banks such as American Express FSB Savings and Discover whihc offer a lot more interest rate that ING…

    Again, Congratulations, and Good Luck!

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  2. Did not mean to have typos – I am usually good at typing 🙂

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  3. Good plan. My emergency fund is a bit higher, only because of my wife being out of work. If she finds a job, I would bring it down to $1000 and use the rest to payoff my fist credit card in my snowball.

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    • Well I can understand how frustrating that must be for her so it is good that you have that money on hand.

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  4. Congratulations! You are definitely off to a good start!

    Some financial advisors recommend to have emergency find equal to at 3-6 months worth of expenses… and some recommend having even up to 9-12minths, given the current economy. At the end of the day, it is up to each individual how much they feel comfortable with and what other backup plans they might have – CDs, parents, money market account etc.

    Once you have set up your comfort zone, focus on paying off your debts and even start saving into ROTH IRA….

    By the way, American Express FSB and Discover Banks offer a much higher interest than others, and don’t have minimum balance requirements…

    Good Luck!

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    • I am going to stick with the $1000 for now and switch back to paying off debt. I will build up the three months of living expenses once the car loan is paid off I think.

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      • Hi there!
        I just wanted to say that I was NOT trying to undermine your accomplishment! I just was trying to convey what I have seen out there, and I would like to see you financially more secure, that’s all! As they say, there is very little substitute for cold hard cash…

        If you feel comfortable with $1000, then of course you should target the detrimental loans, by all means..

        Take care.

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        • I understand what you are saying. I am not comfortable with having just the $1000 but right now it is more than I have had saved up in the past and I am shifting my focus to pay down debt now.

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  5. Congratulations on reaching your savings goal. A $1000 saved is quite a milestone. I will keep on sitting on the $1000 myself, and focus on pushing the car payments. Having a fully paid up car is just such a pleasure. Owing the bank money on a car means that they legally own it, even if the amount owed is much less than what the vehicle is worth.

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  6. Congrats! It initially took me almost three years to build my emergency savings up to $1000. And I’ve had a couple of emergencies over the last two years, so had to dip in a couple of times. I JUST got it back up to $1000. I’ve decided to raise the bar to $1500 because I really don’t like going below the $1000 mark. Funny how that fuels the sense of security. 🙂

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    • I have had to dip into the emergency fund more than once myself and one time I raided it to pay off some debt. I got a lot of flak for that from some people but it was my decision and I felt good about it.

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  7. Personally I am not keeping an emergency fund for myself. Instead my plan is to use my line of credit if I ever get into financial trouble and need cash quick. I would rather put my actual cash towards paying off debt.

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    • I don’t have a line of credit to fall back on so it is the EF for me!!!!!! I also plan on using credit cards but if I do need to get my hands on some cash then that money is there.

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  8. Congrats! Sounds like you have another good place to send those once emergency fund dollars to get down your debt. Good Stuff.

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  9. Right now, I am attempting to grow an emergency fund. I am doing this while I still have a car loan. This flies in the face of Dave Ramsey (my emergency fund is over $1000 now), but I am continuing to grow the emergency fund for one reason – my wife.

    Ramsey rightly states that women like security. I believe this. Now, I could stop contributing to my emergency fund right now, and begin eliminating the car loan, but I know my wife would not feel comfortable in the event we had some major disaster. Frankly, I’m not sure if I would be comfortable, either, since my homeowner’s insurance has a $1000 deductible.

    So what’s the happy medium? I’m contemplating getting to the $5000 mark on the emergency fund and then beginning the process of paying down the car loan. That’s a discussion I need to have with my wife first, though.

    I work in IT, so people are getting laid off all the time around me. Because of that, I’m tempted to save up the full six months of expenses. Choices, choices…

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