Our Mini Emergency Fund: How $1,000 Changed My Life

For some, $1,000 is a huge amount of money. For others, it’s pocket change. For me, it changed my life and it can change yours too!

The experts say, although I am not really sure who they are, that you should have at least 3-6 months of income in a savings account in the event that something should happen. Whether you are laid off from your job or your roof caves in – doesn’t really matter what the case may be. This emergency fund gives you some time to figure things out and get a new job, or gives you the funds to fix whatever is broken.

They say this, but it’s hard – really really hard – to save 3-6 months worth of income if you are already living paycheque to paycheque. However, I don’t want you to be discouraged and not do anything at all. Even if we cannot be perfect – we can still do the best that we can.

For us having a full out emergency fund would be close to $30,000.00 – yikes! Although, I would so totally love to have that in a savings account, this amount would take us quite a while to save.  Plus we need to get rid of our debt first. Getting this type of emergency fund saved won’t happen anytime soon, but what we have saved is a “mini” emergency fund.

A “mini” emergency fund for us is $1,000. And wow does this $1,000 really pack a punch in our lives. So what can a measly $1,000 do for you?

Gives you peace of mind and lowers stress!

When we started our “mini” emergency fund and had deposited our first $100.00, I felt a weight lift off my shoulders. There was finally something, no matter how small, saved in the event of an emergency. To me, it was also a sense of accomplishment. I had never been one to save anything at all – not a measly cent – for me to put $100 into a savings account was a BIG DEAL!

Once we got the full $1,000.00, I was ecstatic. I seriously did a little happy dance!

Despite their size, these funds are mighty!

I know now that if the truck has an unexpected repair or the dogs get sick, we can take care of it without going into more credit card debt. At one point we couldn’t even do that because our credit cards were all maxed out. This was a really bad bad feeling – if something did happen we would be SOL!

The “mini” emergency fund frees us from the worry of trying to decide whether we eat or have a truck to drive to work. That in itself has lowered my stress levels exponentially!

Picture your life with the freedom of not worrying about all the little expenses that seem to pop up at the worst possible times!

Helps you be true to your budget

I didn’t expect the “mini” emergency fund would actually make me better at budgeting, but it has! Since we don’t have a full-out emergency fund, I am a lot more critical on what really constitutes an emergency.

Just the other day, our blower on our fireplace started to act up. It likely needs to be replaced (and we have someone coming out today to take a look). This is money that we had not budgeted this month! However, the fireplace is our main heating source and without it we will be freezing our butts off as it is still 100% Canadian winter!

Without a “mini” emergency fund, I would be charging my credit card or living on on spaghetti or KD for a few weeks!

Now we totally count this as an emergency and could pull out the cash from our emergency fund, but I really don’t want to do that. So what could you do instead (only if you can) and what are we doing for this unexpected cost?

We are reworking our budget. We took a little from a bunch of areas – entertainment, renovations, etc. – and we came up with the cash to be able to get this repaired without ever having to dip into our “mini” emergency fund and without pulling out the credit cards.

This is a step you should always do first even when you have a “mini”emergency fund set up.

When an unexpected cost crops up in your life the very first thing you need to do is look at your budget for the month and see where you can cut to come up with the funds. Even if you can just cut some and still need to use a bit from your emergency fund – that is ok! It is also ok if you can’t find any money from your budget – use your “mini” emergency fund. This fund is just this purpose right!

Keeps your debt at bay

Because we pull either from our budget or from our “mini” emergency fund first, we do not accumulate as much credit card debt as we used to!

Why is this?

When an emergency strikes, our first response is no longer swiping the credit card. Like I said above, we first go to our budget and see if we can rearrange funds to cover it. If that doesn’t work, we have a $1,000 right there waiting for us to use.

You should only use the credit card in dire circumstances! The “mini” emergency fund saves you from racking up credit card debt!

Makes you a little more motivated to start paying off debt

Before the “mini” emergency fund, we never put our extra funds on our credit card debt. We would keep it in our bank account as a “just in case” something happened that month and had always planned to put it on the debt at the end of the month.

Do you know what happens to unbudgeted money? You Spend It!

Now that we have our “mini” emergency fund, we no longer feel that we have to have a cushion in our bank account, so all our extra funds go immediately to our debt. I no longer stress or worry about running low on funds.

Another motivator is that we really want to have a full 3-6 month emergency fund. The faster we pay off our credit card debt, the faster we can get that fund rolling. And everytime I think about life with a full emergency fund, I am filled with absolute peace and joy.

Some people might think that after you get your $1,000 in your “mini” emergency fund the next step would be to continue until you have your full 3-6 months. For some this might work, however, for us we decided that our next step would be to put our extra funds on our credit card debt.

I would love to have a full emergency fund, however, we still have credit card debt looming over our heads. Reading the credit card statements depresses me. If we only pay the minimum payment, it would take approximately 23 years to pay it off. Doesn’t that just burst your happy emergency fund bubble! That is just one of the reasons why we put our debt payments as top priority.

Despite what others may say, a “mini” emergency fund really does pack a punch! It helps you stay sane in a life full of chaos and unplanned events. It keeps you on track with your budget so you can keep that little nugget around. Finally, it kicks you in the butt so you can kick those credit card debts to the curb. Now, do you feel motivated to save your first $1,000?