I Didn’t Think I Needed an Emergency Fund — Until These Things Happened to Me
January 12, 2018
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When I graduated from the University of Connecticut in 2011 with a degree in English lit, I had about $65,000 in student loan debt, no job and no savings.
For a few months, my situation was manageable. I was living with my parents, so I had limited expenses, aside from my student loans. And even with those, I was able to put them in deferment, which meant I didn’t need to make payments while I was unemployed (although they did continue to accrue interest). Things weren’t great, but they also weren’t bad — they just sort of were.
Back then, building an emergency fund was low on my list of priorities — but I would soon discover why having one wasn’t a nice-to-have, it was a must-have. Here are the three life events that made me realize I needed to get serious about saving for a rainy day.
Seeing My Father Lose His Job
About six months out of college, life threw a one-two punch at my family. The first came when my father was unexpectedly laid off at the factory where he had worked for more than 20 years. My parents live paycheck to paycheck and had no savings aside from what was in my father’s relatively meager retirement account. A severance package and unemployment benefits held them over for a while, but when those ran out their only options were to rely on credit cards or dip into their retirement funds. They ultimately needed to do both.
Although my father has since found work, my parents’ finances have yet to recover. The credit card debt they acquired in 2011 is still being paid down. And because my father had to withdraw from his 401(k) early, I can’t help but think about the negative consequences that’ll have for his nest egg once he actually retires (not to mention the penalties he had to pay). Plus, they still don’t have an emergency fund.
To say that they live with constant financial stress would be an understatement, and I realized I never wanted to find myself in the same situation.
Losing a (Furry) Member of the Family
A week after my father lost his job, we got hit with the second blow: Our family dog, Gemini, got sick and needed to be put down.
It was clear that my parents couldn’t spare the $400 that it would take to pay that vet bill. And because I was still looking for a job and had no savings, that left me with only one option: Cash out the 4% savings bonds my grandparents had bought for me in the early ’90s, even though they still had a decade left to grow.
It wasn’t ideal, and I’m sure my grandparents were hoping that money would be put toward helping me fulfill some future life goal. But my only other option would have been going into credit card debt, which I wasn’t willing to do.
Experiencing a Health Scare
Two years after graduating from college, things were finally starting to look up. I had landed my dream job in publishing, which came with a decent salary and perks like a 401(k) and health insurance. I was ecstatic.
With my future seemingly secure, I began making what I thought were smart money moves by aggressively paying down my student loan debt. It felt great — I paid off one loan, then another — until one day, I felt something strange in my chest. A flutter, as if my heart were skipping a beat. And then a few minutes later, another. And then again and again, until I was experiencing about 10 every minute.
A normal person’s first instinct would have been to rush to the emergency room; mine was to start worrying about the $2,500 deductible I would have to pay before my health insurance kicked in. I didn’t have that much money to spare. I had been putting all of my excess money toward my student loans, so I didn’t have anything set aside for emergencies.
I spent two days worrying I’d die of a heart attack in my sleep before I finally caved and went to the hospital. After 45 minutes, I had a diagnosis: stress. I also had a $1,900 hospital bill. I went on a $50-a-month payment plan to start chipping away at that bill, until finally using my bonus from work to pay it off — a year later.
Each of these events had a serious impact on how I viewed my finances, but having heart palpitations and refusing to go to the doctor because of money concerns was the final straw.
From that moment forward, I vowed that I would never again risk my health because of a lack of money. Although I was still concerned with paying down my student loans, I took a less aggressive approach so that I could funnel some money into an emergency fund at the same time. First it was just a few hundred dollars, then it grew to a few thousand.
Now, I have about nine months’ worth of expenses stashed away — which I was happy to have when I was laid off in 2016 and it took about three months to find my next job. I can’t imagine living life without that safety net in place and, no matter what my financial situation, I know that maintaining a well-stocked emergency fund will always be a part of my budget.