Deobligating Emergency Funds

In the past month or so, my budget has been an additional source of stress that I really didn’t need. I was over budget in a number of categories, while still trying to work on that YNAB concept of living on last month’s income. Things were clearly not going well.

I had also realized that while my work wardrobe was great for the winter, my sweaters were not going to cut it for the summer months and I had to spend some money on some shirts for work. And in another 50 miles or so, I would need a new pair of running shoes.

So I had all that occurring on one Excel spreadsheet. But over here, on another Excel spreadsheet, was the account that I had designated my emergency fund. It very easily had 10 months of normal expenses in it – not just the expenses I would have if I lost my job and needed the emergency fund for 10 months. And this isn’t including my normal savings account – this is just the emergency account.

After a stressful day at work, I came home to find the budget spreadsheet open on my computer. And I made a decision. I took $1000 out of my emergency fund account, transferred it to my day to day account, and reworked the budget.

And it was like a weight had been lifted. I was no longer overbudget in a bunch of categories, and I can “splurge” on the $10 charity event on Friday. I can go to the store and buy a few nice, yet inexpensive items to wear to work. I can finally buy the frame for my bar association certificate.

Do I plan to spend all the money this month? Absolutely not. But it’s the padding I needed to get me through the expenses flying at me from all directions. Will everyone agree with this tactic? Probably not. But for me, I think it was the right decision. If nothing else, I feel better about my financial situation, and that’s what’s important.

Plus I won’t have to wear sweaters to work in July. Always a good thing.

Megan Smith

Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:

In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance.  It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information.  It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck.  While that was working for me, clearly I needed a better plan.

While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.

Except that’s not what an emergency fund is for.

So I did a lot of research, read a lot of blogs, and decided that I needed a plan.  I needed to budget.  I needed to know what I was spending my money on.  I needed to prepare for the future.

I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way.  I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.