Monday, April 16, 2012

Separating the Emergency Fund from other Finances

I opened a separate savings account at a credit union a little over a year ago.  This was a step I took because of all the great finance blogs that I'd just started reading.  I also starting direct depositing money into it from each paycheck. For the rest of 2011 I kept the emergency fund in my spread sheet where I budget and track cash flow.  When I made a new spreadsheet for 2012 I left the savings account holding the emergency fund off of the sheet, effectively hiding it from view.

Pro #1
I don't think about it or touch it which means that it's actually growing!  I get a big boost from it every time I calculate my net worth and it's wonderful to see that it's starting to fill out a bit (thank you tax refund!)

Con #1
I find it discouraging when my slush fund is fairly low, because it feels like I don't have much of a buffer.  I really don't want to use my emergency fund!  I think I would find it a bit heart breaking to need to tap into it after all the time it took to build it.  Although, I'm much happier to tap an emergency fund then go into debt.

Pro #2
I've finally adjusted to having a smaller paycheck.  It took a while to get used to, and after I initially set up the direct deposit I ended up pulling money out of my slush fund for several months to pay the bills.  I'm so happy that I'm finally getting better at this!

Con #2
It doesn't feel like I'm ever going to be done with this step in my finances.  Given that I will be job hunting within the next couple of years I'd like a emergency fund substantially larger than the 3 months many PF writers recommend.

Pro #3
Starting and growing my emergency fund is the first positive thing I've done for my finances on purpose.  Prior to putting money aside I would spend all the money I made.  After all, I'm a student, I'm supposed to feel broke!

Con #3
"Broke" now has a new definition for me.  Even while I have enough money to pay my bills (thanks to a very frugal living situation) I still feel like I'm always scraping by.  Having financial goals is great but it takes a long time to reach them.  Setting up realistic goals for the short term is often disappointing because I would like to be able to put more towards them!

Pro #4
I've become much more frugal and pay a lot more attention to my every day choices.

Con #4
I think I'm starting to burn out on the frugality front.  I'm starting to wear through clothing items (I really need socks and another pair of jeans!).  I'm daydreaming about the vacations I want to take and places I'd like to go out to eat!  I know that these things aren't necessary...but...

How do you deal with burn out when it comes to your financial goals?

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