We’ve talked in the past about emergency funds — particularly where they fit in a money roadmap and where you should stash the cash you’re saving for an emergency fund — but here’s something we haven’t talked about: when is it ok to dip into your emergency fund? How big of a deal is it to you if you need to take some money from your emergency fund to cover a big shopping trip, a vacation, or more? Do you overfund your emergency fund (and keep more than 6-9 months living expenses) so you CAN dip into it if you need it — or do you have a “stop point” where anything above a certain amount of money goes into an investment account? (On the flip side, do you keep a “fun money” or “mad money” account just for these kinds of indulgences — and save money to be spent?)
Pictured at top: I’m not usually a beige wallet kind of person, but this highly rated “tan sparkle lizard” wallet might make me change my mind. It’s $89 at Nordstrom (six other colors, too) (affiliate link).
As we’ve discussed in the past, I’m a pretty aggressive saver who hates to keep money sitting in low-interest checking and saving accounts, so for the most part I clear out our checking account every month and move left over money to higher interest online savings accounts. In addition to retirement savings, I use automatic transfers to savings and automatic investing as often as I can, and I also try to amortize known big purchases (like term insurance and a vacation budget) so that the cost is spread out over the year instead of hitting in one particular month. In fact, I have about 10+ accounts open at Ally right now for various things personal and business, as well as one big account at Ally that we consider to be our “family emergency fund.” But of all my crazy accounts I don’t have a “fun money” account — and maybe I need one for those for times when our credit card bill is bigger than expected, or it’s been a birthday month (or, ahem, a Nordstrom sale month) and more. (2019 Update: Check out our whole post on how to automate your savings!)
What do you guys do? Is your “emergency fund” a totally discrete thing — and thus it feels like a true emergency if you have to dip into your emergency fund — or do you have an amorphous slush fund where you save all the money you’re not investing or using to pay down debt or monthly expenses? Do you stick to a strict budget, or set aside fun money so that this doesn’t become an issue?
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Paging the Bride Who Baked Her Wedding Cake
I have separate accounts for things like vacations, car repairs, and other non-regular but bound-to-happen-sooner-or-later expenses. So I consider my emergency fund to be for real catastrophes like “I lose my job” or “the Big One hits and I have to pay the 10% deductible on my earthquake insurance.”
In 20 years I’ve only used it once, and that was when I left my husband and had to set myself up in a new apartment. That was definitely a true emergency in my book.
Ugh. That was me.
Still hoping to hear from the cake-baking bride, though! ;)
+1 in wanting to hear about how the wedding cake went!
We have a similar approach. We have a “job loss or catastrophic event” fund that is in an online bank account that never gets touched. We’ve been together about a decade and never used money out of it. Right now it has about 6 months of living expenses.
We also have a regular savings account that houses our major repair, etc fund. This may also include long-term save to spend goals, like house renovations, vacation, etc.
DH and I have a separate emergency fund that we don’t and wouldn’t touch unless it were a true emergency. We also have a savings account that we use for those “bound to happen sooner or later” expenses–car or house repairs, replacing a broken laptop, etc. And we have separate savings accounts for specific, predictable expenses–daycare (due twice a year), vacation/entertainment, the holidays.
Sorry for the TJ but has anyone been through something like this? My SO of 10+ years recently developed a gaming “habit” and I found out a few months ago that he’s spending THOUSANDs of dollars a month on it (not to mention 20-30 hrs a week). He’s had a hard year with work and the death of his mom but I cannot stand to see this any more and am going to sit him down to talk about it tonight. Anyone been through something similar and any thoughts how to handle it? Technically he’s not spending money he can’t afford to and he’s not neglecting me or work, but it’s been six months and I’ve had it. He knows I know of the game but pretty sure he thinks he is hiding the amount of money he is burning. I am so stressed just thinking about it and I won’t see him until late tonight :( The plan is to approach it from how much it is causing me stress and worry to see what is going on and see how it goes from there…
Don’t do this talk late at night on a weeknight. Just don’t.
I’m not a gamer and neither is my husband…but if it’s his money to spend and he’s not neglecting you or work, what’s the issue?
My DH flushes oodles of money and hours down the toilet on his hobbies (boats and antique cars). I gag when I find out how much but it’s not my problem since it’s within his slush fund budget. He has the same reaction when he sees my shoe purchases.
“I gag when I find out how much”
hahahhahahahah +1 this is so my husband with his shopping.
but again, it’s his fun-money. it doesn’t affect our relationship. we’re not in the poor house. all lines of communication are open.
I just smile and nod when new things appear.
Yep. If he can afford it then not clear why or how this is your issue.
It stood out to me that your approach is (1) to talk about it late at night, presumably after you’ve both had a tiring day at work, and (2) to focus on how his habit affects you. Would it make sense instead to delay the conversation until you are both well rested and have a little time to devote to a chat without stress? Otherwise this seems destined to turn into a blow-out argument. Also, consider approaching it from his perspective. Honey, this seems like a drastic change for you, and I’m worried about you, and would like to talk it through. I know you’ve had a rough year, and since we’re a team, let’s get this all out in the open. You’ve been spending ~$X per month and X hours per week – I’m not criticizing your choice – you’re an adult, and if this is what you need, I”ll support you. But we’ve been together for a long time, and based on what I know about you, this isn’t how you would have chosen to prioritize your time and money, at least not to this extent. What can I do to help? etc.
Is his gaming at the point where it’s an addiction? If not, I agree with Jen – it’s not really different from any other hobby. Maybe it’s a hobby you don’t like, but that doesn’t necessarily mean it’s a problem.
If he’s going into debt, missing work, avoiding responsibilities or neglecting your marriage to game, then that’s when you have a talk.
I was in that boat for a while. What bothers me most is that he hides it, and while it’s not a neglect kind of issue, things that I would like to get done eventually are just in perma-backseat mode. And refuses to do things like buy a new car because he’s cheap, but so far this year he’s spent enough to buy a pretty darn nice car. I get what all of you are saying about not doing it tonight but I can’t take not sleeping and stressing about it anymore. It’s out of character and he’s hiding it, and I just feel like I can’t keep on pretending like I don’t know what’s going on. (He will be mad that I’m checking up on his finances but I equally feel like his lying by omission is a huge problem.) I had a hunch he was getting too deep into this and that’s when I decided to investigate to see if I need to do something… wrong on my part but I just knew from his behavior he was acting a little too invested in it. I mean, he can even play this game without spending so much on it, I dont understand it.
This might be a long shot, but is it possible that he’s not aware of how much he’s spending? A lot of games are set up so the act of spending the money doesn’t fully register while you’re in the game. I’m reminded of the Candy Crush thing a few years back where otherwise mostly reasonable people spent thousands because they just kept pressing “pay $0.99 for an extra life (or whatever it was)” and didn’t really think about what they were doing.
The hiding is definitely a huge problem. Honestly it sounds like his problem isn’t the game, it’s depression. He probably needs some counseling.
He’s depressed and suffering. Do not spring this on him late at night when he has to work the next day. Do. Not.
Is this like Ben Afleck’s poker (and other) issues?
Or like me binge-watching The Wire after having a miscarriage? If the second, I wouldn’t appreciate a lecture about my priorities until I’ve started to lose more than my free time after a long while.
Sorry, I don’t really get these references. I get that it takes time to grieve but I was hoping after six months it would be at least showings signs of getting better. It’s not. I’m not really qualified to determine whether this a hobby or an addiction/escape. But I’d say if you were binge watching the wire and spending a fortune to do it six months later, wouldn’t that be cause for loved ones to be concerned?
It sounds like he’s incredibly depressed and using this as an escape. Sometimes the second wave of grief hits months after the loss, after the shock wears off. No different from someone going through a heavy drinking phase after losing a loved one.
I echo all the other suggestions to wait until a better time and approach it as calmly and compassionately as possible. It sounds like you are at the end of your rope, which is never a good time to have a constructive conversation. It’s a really great time to have a regretful, blow out fight where he’s completely blindsided and shuts down and you don’t get any kind of positive resolution.
Believe it or not I feel like I’m about as level headed as I’m going to be.. I’ve had a few months to let it sink in but I haven’t been able to find an easy way to approach to having the conversation because he just doesn’t bring it up (probably because he knows I don’t approve).
I mean this gently: You came here asking for advice, and you received a number of independent responses that all hit on the same few themes. You’re pushing back on that advice right now, but it might do you some good to just sit with it instead. We all have a little distance from your situation, and that can be helpful.
No, I 100% agree with what you are saying. I guess I’m just trying to convey that I have come a long way down from where I was when I first learned about it, but confrontation is super hard for me and I’m going to be nervous and upset no matter when I actually do it. I’m just feeling like it’s time to rip off the bandaid because I’ve pushed it off for so long – I’m not probably the emotional wreck I’m making it sound like. But the anxiety is now more about how he’s going to react and that he’s almost certain to get defensive/angry, which will happen no matter when I do it.
I think the advise is generally good, but any time your boyfriend has any kind of addiction, it can be a probelem, whehter it is gambling or drinkeing. My ex became a big drinker, and made my life miserable. If your boyfreind is a drinker, look out, but the same applies if he is busy gambleing away your money (or his money), b/c you will have NOTHING to show for it but a heavy heart (and tuchus if you eat your troubles away). Talk with him NOW, and if there is troubel on the HORIZON, DTMFA!!!1 YAY!!!
If it’s been a few months, you can wait a few days and address this on the weekend.
I dissent a little bit. Spending thousands and thousands of dollars on a hobby without your spouse’s knowledge is fairly atypical I think and definitely wouldn’t be ok with me. Unless you guys have set an express budget for “fun spending” and he hasn’t exceeded that budget, I think your concern is understandable. And the fact that he’s attempting to hide it makes it even more problematic.
+ 1000. Sounds like spending thousands of dollars a MONTH on something, even if you technically can afford it, and up to 30 hours a week is an addiction, not just a hobby. I’m certainly no expert but I think the OP has every right to be extremely concerned.
I think gaming as a hobby still has a very negative stigma attached to it. I’m talking about in general, not in OP’s husband’s case.
If someone was spending 30 hours a week reading books, nobody would say it’s weird or problematic.
Disagree. 30 hours a week is an incredible amount of time for an adult to spend on a hobby. I like to read a lot, and I usually read at least one book per week but I don’t spend anywhere near 30 hours on it. Most people work 40+ hours/week and sleep 50+ so you’re talking about 70-80 hours per week as an absolute max for all household and personal chores, all hobbies and all time with friends and SO. If you work 60 hours and sleep 60 hours (slightly more than 8 hours/night) you only have 50 hours for everything else. Devoting half of that to a single hobby seems really excessive, especially if it’s something that can easily be done in less time. I have a friend who used to be in intensive, Olympic-bound training for a sport and I don’t think even she spent 30 hours per week on it, at least not year-round.
+1. My husband and i probably have 3 hours together each evening, so if one of us was spending 30 hours/week on any type of hobby, we’re talking most of every night plus a full weekend day. Not okay.
Agreed, and that’s one of many reasons I’m trying hard not to be judgmental. Tbh if it weren’t for the money I’d probably let this go… the money worries me more 1) because he doesn’t tell me 2) it’s out of character and the only sign to me this might be an addiction and 3) if it is an addiction then I feel every day is compounding how much gets spent on it.
I think I’m in a much different place in life than most people here, but I’m really interested in this thread as a means of planning for the future! Right now I have one savings account that I’m trying to get up to 5k, which will be 3 months of bare minimum expenses for me, then I’ll shoot for 10k as a 6-month emergency buffer. For me, this account is for the inevitable “oops I popped a tire” moments as well as the more drastic “I got laid off and have to make rent” scenarios. Hopefully when I’m more $$$ I’ll be able to diversify into different savings accounts!
Our emergency fund is really an “unexpected job loss” fund.
Same. I’ve been laid off before and a robust savings account is necessary to cushion the blow. Unemployment pays nothing.
I keep about 1/2 my emergency fund in an online savings account, and very rarely touch it. I haven’t budgeted for vacations in advance before now, but I recently started an auto-debit of $x per month with a goal of trying to have a big vacation planned for 2018 fully funded before I go. once upon a time, this online savings account actually paid 5% interest (ha!) but now it is basically a way to save the money and make it relatively untouchable (though technically it’s available for transfer on a few days notice).
The other 1/2 of the emergency fund is the cushion in my day-to-day bank accounts — and I try to not dip into it too far, but occasionally do and refill with the next paycheck.
A shopping trip?!?!? Then it’s not an emergency fund, it’s just a savings account.
I agree. I have a slush fund (I’ve named in that in my online banking) that I dip into when my shopping is more than normal one month but other than that, I try to make my emergency fund strictly that.
Although I will confess, I dipped into it for furniture when I knew I had money coming but it was a few weeks later (and also to make retirement investments at the end of the year).
Dress for 4-year old?
Thanks to everyone for their suggestions! I ordered a black and white Hanna Anderson skater dress with a bow.
I have multiple savings account with my bank, one is my emergency fund, it holds about 5 month of living expenses and we have touched it once- when our furnace broke. Since then we have set up 3 additional savings accounts, one for house savings (repairs, upgrades, etc), one for vacation and one general (money we can use for bigger purchases, e.g. car repairs, wish list items, etc). I auto transfer a certain amount into each of these every month and then see if I can add additional funds at the end of the month.
I’m always amazed by how much everyone on this s!te is able to save. Do you all make six figures and live extremely frugally? I do not have enough money left over at the end of the month for 10 different savings funds.
“Do you all make six figures and live extremely frugally?” In my case, yes. I wouldn’t say extremely frugally, but certainly I don’t live a lavish lifestyle.
DH and I make combined $160k and we live in a LCOL. Our two biggest expenses are our mortgage, which is $900 per month for a fairly modest house, and our childcare expense, which is $830 per month. We paid off our student loans ages ago. We both spend money on random crap each month, but since our big fixed expenses are so low, it’s never a problem.
It has not always been this way, of course. There were several years early in our marriage where we were living on about $27,000 per year. That really blew, but it gave me a very frugal mindset. I don’t tend to replace things very often. We drive our cars til they die and very rarely buy furniture or anything expensive like that. Almost all of our furniture is antique, which costs about the same as ikea furniture, but is much higher quality. Some of my work clothes are 10 years old. We DIY a lot of house maintenance. We don’t go on lavish vacations or fancy restaurants, but I’m hoping to up our amount of travel as our kid gets a little bit older. I’m happy with this lifestyle. The peace that comes with finally reaching this point after struggling so hard for years is amazing.
That is definitely a LCOL area. I pay nearly that amount (~$800) in childcare every week. 2 children.
And not all LCOL areas have cheap daycare. We live in a very LCOL area and have a similar mortgage payment, but daycare for one child is $2500 a month. My theory is that because there isn’t much demand (most women here are SAHMs) only a few places offer it and there isn’t enough competition to drive down prices but I’m not sure if that’s really the case.
The 830 is for one kid. I know I have it really lucky as far as that expense goes.
I agree. I feel like I’m scraping money together to pay every bill. I used to have three savings accounts when my husband and I first got married. One was for joint savings and then we each had one. We decided how much we needed out of each week’s paycheck to live and the put anything over that into the savings accounts. THEN we started having kids. And things got crazy. Now we have summer camp and day care and car payments and mortgages and I really don’t know how I even breathe each month. We’re down to one savings account for us jointly and it has the minimum needed in it to keep from getting a monthly charge. The other two I closed because I was LOSING money each month from fees. Each of my kids has a savings account that I put $5 every paycheck into. And those have gotten pretty significant (for us) so I use those as my slush funds if I need to pay taxes or something. Then I pay them back over the next couple paychecks or so.
Basically my whole paycheck goes into those different savings funds, after the monthly bills like mortgage and utilities are paid. Then life happens and as life happens the appropriate accounts are drawn on. One month it might be “house repairs” that has a big withdrawal. The next month it might be “auto expenses” because we needed an oil change and the tags were due. The next month it might be December so we vacuum out the “Christmas” fund. It’s not that we have more money than anybody else, it’s that we manage our money so that every dollar has a job to do.
Coming back to say it’s hard to get started because the irregular expenses keep coming as you are trying to build up the savings accounts to pay for them. So essentially when you’re starting you almost have to fund a lot of things double. But I’ve been doing it for years and for me it’s the only way to go.
Yes, I think the key is living frugally. When I first started working, I only made $40k as a lawyer in a high cost area. I lived frugally and still managed to put 1% into my 401k and money in a savings account each month – it wasn’t a lot but it was something.
Today I make more money so I have loosened the reins a bit but I still save the bulk of my money. People say they don’t have money to save but then I see what people spend each day. Five dollars for breakfast, $10 for lunch, $5 for an afternoon Starbucks. Do this everyday and it all adds up. Then people go out for brunch on weekends or go out for drinks. Again, it all adds up and that is money you could be putting in a savings account.
When I was in law school, I was dirt poor so I learned how to live frugally and how to seek out free or lost cost activities. You can have a very active social life without having to spend a fortune (or anything at all).
Yes to six figures, and yes to frugally (although the level of extreme-ness has eased off over time). Big law job after law school with luckily less than 100k in debt from law school (lived very frugally during law school and had some parental help with tuition).
Seconding Anonymous at 7:23 am. The amount people spend on coffees and lunches adds up so fast. It is super easy to spend 20 bucks a day on food/snacks which is $400 a month. It seems small, but that’s an extra$4800 a year. It’s amazing how much the little purchases can add up.
This will probably drive all of you crazy, but despite being super type A, since I pretty much manage the household finances, I don’t really have separate savings accounts. I know what my ear-marked totals are, so it just seemed like a waste/hassle to divvy stuff up.
We are split account holders as my husband is self-employed and I make considerably more than he does. Mostly we just live off my income and most of his profits go either back into his business or into his stock trading accounts which for my peace of mind I pretend don’t exist because day trading = gambling to me (even if he does make a decent profit from it). To start with, we are one paycheck ahead (I get paid monthly) – so my end of July paycheck is for September expenses. Part of my direct deposit goes $200/month into a separate bank account that I don’t use regularly and has since I started working – that is probably a true emergency, emergency account because I don’t ever see it/touch it, but it’s probably only about $10K. What I think of as an emergency fund is just my general savings/slush fund account. I put about $6K a month into our joint account (which reflects amortized expenses in the budget and includes an allowance for joint savings to smooth over the more minor house expenses, car repairs, etc.), and every few months move the leftovers to our joint savings. The rest of my direct deposit goes to pay my bills (some of which is joint on my credit card for the rewards points, some of which is my shopping) and the rest knocks over into our savings/emergency fund (usually a few thousand a month – and that is my buffer for high spending months). The total now is somewhere around 12 months of current expenses (no cutting back), probably closer to 18-21 months if we cut back to bare minimum. That is the account that I raid for big expenses, but never below 6 months of full current expenses (e.g., new insulation, replaced furnace/hot water heater/A/C, unexpected shower remodel due to leak). We usually split any bonus (not this year, thank you, baby) between building the savings (we will both need new cars in 4-5 years) and a home project. Been thinking about clearing out the amount over 12 months into a mutual fund(s) and or extra retirement savings beyond what we are already doing, but given we are expecting baby any time now and want to replace the windows in the spring or possibly repipe the house depending on how the post-baby budget goes, I’m inclined to hold steady for now. My husband would be a max 3 month emergency fund saver if he managed the money, so it’s better that I do it since I’m the more conservative one. I’m the one who decides if we have money for big expenses/projects and vacations, and he generally defers to my approach. Usually we are able to fund the smaller big projects/vacations out of the excess in a given month or two, so my mental allocation tags those amounts if needed.
I have 2 savings accounts: one is an “escrow” account for my home owner’s insurance and property taxes, because I pay those myself. Once a month $X is autodebited to that account from checking, and when an amount is due for it (2x a year) I transfer the exact amount back to checking to cover it. The other is my unscheduled emergency repairs fund, basically. It _had_ $10k in it, until I had to replace my AC recently. Now it has significantly less than that! I have also used the money in this account for unscheduled car repairs. My checking account also has about $500 cushion in excess of what I spend each month on living expenses and mortgage payments, etc.
The rest of my money is in vanguard index funds. When the “emergency repairs” fund is fully funded (I consider $10k fully funded), I autotransfer money to the Vanguard account every month. When, like now, that that account is underfunded, the savings goes there instead. I consider the money in my index funds both long-term life savings for retirement, and, potentially, f*ck I got laid off savings.
A few years ago I was desperately glad that I was putting all my money into a saving account (about $70k), and not somewhere I couldn’t get at it. Theoretically, I was saving for a house, but mostly I was just saving because I hate spending. Then I lost my job and spent 6 months unemployed, a year at minimum wage, and now two years in law school. Those savings have kept me afloat. They are almost gone now, but I only have one more year to get through and I am working part time. And my SO just graduated and is working now, so that helps.
Does anyone else’s emergency fund also double as a retirement/investment account? In this case, blue chip stock with a stable history so we are comfortable with the risk of it being in market. We could liquidate if needed, although it would take a few days and it’s already got 12 months of expenses in it. We also separately save for retirement through company sponsored plans and have small savings account for cash, vacations, etc. In theory, I’m comfortable that we’ve got emergency funds, but maybe not?
That is mainly what I do too. I have a few separate bank accounts that I setup for vacation, dog expenses, stuff like that, but the rest of my money gets sent to my Fidelity account and invested in index funds, so in any true emergency that cost more than I could raid from those other accounts, I’d have to sell the funds. I’ve done that before and I am fine with it. I also have about 3 years of living well and 4 years of basic living expenses in my account, so even if the market took a pretty big dive I’d survive for a long time.
I would never keep my emergency fund in the stock market. During the financial crisis nearly a decade ago, stocks fell by almost 50%. And it’s most likely during an economic crisis like that when an emergency fund will be needed, due to job loss or whatever. And we’re currently in one of the longest bull markets ever, so a correction of at least 10% or 20% in the stock market is not unlikely.
So that my emergency fund earns something, I keep the money in a mix of CDs, ibonds bought from the Treasury Department, and a high-yield account that pays about 2% as long as I make 10 debit card transactions a month and pay one bill (so I have a utility bill debited automatically).
Feel free to give feedback. This is what we do:
Our savings/emergency funds are in the stock market/investment accounts. That money is definitely not for emergency shopping, more for losing a job and being unemployed for a very long time. Some money is usually in the investment account waiting for the right time to invest, that money has once been used as an emergency fund for something very expensive and unplanned. Sometimes there isn’t much of an emergency fund when there’s an opportunity to buy shares at a good price.
Our salaries are paid to our personal separate accounts. Then most of the salary is moved to our shared household account. All expences, personal or shared, are paid from the household account. Usually the money slowly builds up in the household account, so smaller emergencies like the washing mashine breaking could come from there. When our personal accounts have accrued some extra that is just sitting there (for the past few years there hasn’t been any), the extra is moved to the stock market/investment accounts.
We have both worked part time for the past few years to stay home with the kid so our household income is about 60k. The amount of savings and what’s left of the mortgage (we pay about 1500€/month for a small apartment) is about equal. The car is almost paid off, but it’s a luxury, we don’t need it where we live. The money that’s tied up in the car could be considered an emergency fund too. We agree that we would rather sell the car than touch our investments.
I think we may be okay keeping our emergency fund in the stock market because we live in Finland. Public health care is cheap for the most part so we chose not to buy private health insurance, because those plans don’t cover much. Public health care cost examples are 160€ to give birth, 30€ to be treated by a doctor/dentist, but 100€+/session for talk therapy. Medication prices are relatively cheap but rising e.g. some of the migraine meds I need are no longer subsidised, so what used to cost 10€ now costs 60€ (the list of subsidised medications is revised yearly and some may fall off the list if something else is deemed comparable or more (cost)effective, so suddenly the tablet form of a medication is subsidised but the injectable version is not). Daycare is about 200+€/month. We hope that university education is still free and student loans cheap in 15 years although we have an investment account for our kid. In case of unemployment the benefits would initially soften the financial blow, but I don’t think we could afford to stay unemployed for over a year for example. In exchange for this public safety net we pay almost 30% income tax.
We set up an emergency fund after we got married and had been working at big law for a few years. Funded with $50K for our NYC life. We used $20K from the account when we bought our house (we had a separate account with the majority of our down payment in it), and agreed $30K was enough for the fund, given that we moved to a MUCH less expensive place. Mortgage payment is $1,800/month. We otherwise have not ever touched the money. It is totally liquid in a “high earning” (but not really) savings account. My husband is very, very risk averse and could not handle the stress of putting the money anywhere but a completely liquid account.
We have other savings accounts for house emergencies, vacation fund, etc, but think of that chunk of money as our “lose a job” account. I work for gov now so am unlikely to be fired, but my hubby is a junior partner and I know having the money there gives him piece of mind if something big were to shake up at his firm.