Goal 1: Emergency Fund

My first financial goal is to work hard to build up an Emergency Fund. While I’m not a Dave Ramsey follower per se (I’ll write another post on this another day) I do agree that where we get hit hard is emergencies. Dave recommends $1000 as a starting point, over here, as our costs are so much higher, I think a lot of people aim for £1000 initially.

I’ve been hit hard twice with unexpected financial costs, both times were due to lack of employment due to health, schooling and moving, and I used all my savings to tie me over. I didn’t have anything “ear marked” so to speak, so I pulled money from every source I could find. I was under the allusion that pulling out money was what savings & credit cards were for; how I’ve changed! Of course savings are there for a reason, to use them in times of need, but the concept of having long term savings that aren’t touched wasn’t something in my terms of reference. 

I’ve decided that my emergency fund needs to hold 8 months worth of expenses or 12 months worth of extreme frugal living if I was without employment. My plan is to put the £1000 in an extra paycheck my current employer owes me to start me off. After that, for the first 6 months of my move to London I plan to put £400 a month into my fund. In November I hope to move to a cheaper flat and then should be able to put £800 a month away (just shy of 1/2 my take home income) for the next 14 months, with the aim of ending up at £15,000 by December 31, 2009.

This is going to take a great deal of sacrifice. I will be living on £80 a month for groceries and £20 a month for all other needs like washing up liquid, soap, toothpaste etc. I will not have a land-line until I move to cheaper accommodation and I will also not have sky or cable or the internet (GULP!). I will also start to look for a part time job and will probably try to do things like online surveys from September onwards so that I can earn another £200 a month. The way I see it desperate times call for desperate measures.

Plonkee wrote a great post about emergency funds today, I for one am ready to grow up!