Better Safe Than Sorry

Why I Didn’t Have an Emergency Fund Until I Was 39

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I don’t need an emergency fund. 

This was me for the majority of my adult life. 

The thought of saving up all of that money “just in case I needed it” wasn’t very appealing. 

Thankfully, I was lucky enough to have never found myself in need of an emergency fund. 

It wasn’t until I was 39, five years into my personal finance journey, that I finally convinced myself that an emergency fund was essential for me.

And I’m so glad I changed my mind. My emergency fund allowed me to easily replace an air conditioner in the middle of a humid midwest summer. And more importantly, it has given me peace of mind. 

If you are anything like past Mel and struggling to motivate yourself to tackle the emergency fund goal, this article is for you. Or if you are simply curious as to why it took me so long to have an emergency fund, read on. 

Here is why I didn’t have an emergency fund until I was 39 and why I changed my mind.  

But first, a real quick explanation of what an emergency fund is.

What is an Emergency Fund and What is it Used For?

An emergency fund is a stash of cash that is meant to be used for an urgent need.  The keywords here are “urgent” and “need”. 

Urgent needs are considered things such as:

  • Home repairs like a flooded basement or broken water heater
  • Car accident
  • Veterinarian bills
  • Costs of taking care of a loved one
  • Medical Emergency
  • Loss of income

On the flip side, emergency funds are not meant to fund our sudden wants

Things like:

  • Last-minute vacations
  • A shopping spree when you are feeling down
  • New living room furniture because you are tired of your current stuff
  • A new car simply because you want one

Now that we know what an emergency fund is for, let’s dive into how I convinced myself that it wasn’t a priority to create and save for an emergency fund. 

Reasons Why I Didn’t Have an Emergency Fund Until I Was 39

Didn’t Think I Needed One

I’m going to blame this one on being young and naive. I simply didn’t think that I needed one. 

What could happen to little old me where I would need a stockpile of easily accessible cash?

There was no way I would lose my job. My employers love me and our sales are going up every year. And I was healthy as could be. What could go wrong? 

During those years, the thought of finding myself facing a hardship didn’t seem plausible. 

Unfortunately, we all know it’s simply not true. No one and no job is invincible. 

It’s Impossible to Save That Much Money Without Changing My Lifestyle

Saving up 3-6 months’ worth of living expenses is no joke. It’s a significant chunk of change that can take years to save. 

For me, the idea of saving that much money was daunting. And to make it more difficult, I did not have a successful track record when it came to saving. How would I ever be able to save up 3 months of expenses without changing my lifestyle? Where was this money going to come from?

Looking back, I think part of the reason I convinced myself that I didn’t need an emergency fund is so I didn’t have to figure out where that money was going to come from.

I liked my life and my spending habits. I didn’t want to cut back on things like vacations to save for a “just-in-case” money emergency. 

Little did I know that there were plenty of things I could adjust in my budget that would allow me to save for an emergency fund while still living the life I wanted

I Could Rob My Retirement Accounts If I Had An Emergency

This is how I convinced myself that I didn’t need an emergency fund even after I started taking control of my finances.

When I first started focusing on my finances my main goal was to skedaddle out of the workforce as fast as possible. Therefore, putting as much money as I could towards my retirement goals was my main focus. And I continued to convince myself that I didn’t need an emergency fund. 

I thought if an emergency arose that I would simply steal from my retirement accounts. I had penalty-free access to my Roth IRA contributions, so I figured that is where I could easily get the money from. 

But what I didn’t think about was how taking that route during an emergency would affect my ability to skedaddle out of the workforce ASAP. My plans could be significantly delayed if I simply raided my investment accounts. I was putting my dream at risk. 

There you have it, the reasons pre-39 year-old Mel chose not to have an emergency fund.  Now let’s see why I’ve changed my mind.

Reasons I Have An Emergency Fund Now

Things changed in my 39th year of life.

Past Mel was putting her financial health at risk by not preparing for life’s lemons. And I no longer wanted to live with that risk. 

I had worked hard for 5+ years to get my finances together and I didn’t want to jeopardize that with one unforeseen expense.

Yes, I had to put a few money goals on pause, like saving for home improvements and a campervan, while I stashed cash into an emergency fund. But in the end, I know the effort was worth it.

Here are is what inspired my change of heart. 

The Warm Fuzzy Feeling of Financial Security

Knowing I have a stash of cash to help me if I lose my job or am unable to work is priceless.

As I’ve grown older, I’ve realized it’s not out of the question for either of these two things to happen. I’ve seen co-workers injured and unable to work. And I’ve seen companies merge and let long term employees go. 

Life is full of uncertainty. You never know when your company is going to go through a major shake-up or if you will suffer an injury that would prevent you from working. 

Less Likely to Have to Take On Debt 

I’m not a huge fan of taking on debt. Yes, we have a mortgage and an old car loan, but part of our current money values is to avoid taking on debt whenever possible.

By having an emergency fund, we avoid taking on debt when life gives you lemons. When that basement floods, we can dip into the emergency fund instead of taking out a loan or using credit cards to gradually pay for the repairs. 

An emergency fund protects our financial stability. 

Makes Times of Economic Turbulence a Little Less Stressful

When there is economic uncertainty in the air, having an emergency fund can help you feel at ease. 

Yes, the stress of financial uncertainty will still be there, but knowing you have a stash of cash to fall back on if your source of income ceases to exist can relieve some of that stress. 

My Financial and Life Goals Are Less Likely to Be Derailed by an Emergency

Emergencies can easily derail our life goals. Making it a priority to have an emergency fund helps ensure our plans to go on that vacation or to retire in style stay on track. 

This is because if we have an emergency fund we’re less likely to have to steal money from other goals to cover the emergency. Our priorities are protected. 

One thing I’ve learned is that preventing yourself from dipping into your emergency fund takes a bit of discipline. This is why I think it’s important to know exactly why an emergency fund is important. When you understand its significance, you’ll be less likely to raid it to cover those unnecessary wants. 

If this is all making sense to you and you find yourself in need of starting an emergency fund, you are probably asking “Where do I start?”.  

How to Start Saving For An Emergency Fund

Determine How Much You Need

The rule of thumb is to have 3-6 months of basic living expenses stashed away in an emergency fund. But how much you decide to save will all depend on your comfort level. We all have different tolerances for risk, family situations, and assets we want to protect with our emergency funds.

In all honesty, any amount you can get into an emergency fund is a positive thing. So if you think that saving one month of expenses or $1000 into an emergency fund is what is doable for you right now, then go for that. Take small steps if you have to. 

Right now we have three months of basic living expenses but are considering beefing that up a bit. 

To figure out what your basic living expenses are, a great place to start is by creating a bare-bones budget. Your bare-bones budget will show you the amount of money you will require in order to fulfill your basic needs each month. 

Find out how to create your bare-bones budget here:  Bare-Bones Budget: Why You Need to Create Yours Today

Figure out How to Fund Your Emergency Fund

Now that you know how much you want to save into your emergency fund, now it’s time for the hard part. It’s time to figure out where the money is going to come from. 

When I started my emergency fund, I put other savings goals, such as home upgrades, on temporary hold and diverted all of my savings to my emergency fund. 

Other ways to fund your emergency fund include finding ways to cut back on your expenses or increasing your income. 

If you want to cut back on expenses, but are having a difficult time figuring out how, start by looking at your bare-bones budget.

The bare-bones budget is a powerful tool to help you see what you can temporarily cut out to start your emergency fund.

Decide Where to Keep Your Emergency Fund

This is probably the easiest part of funding an emergency fund.  

The answer is a high yield savings account. High yield savings accounts are typically online banks that offer higher interest rates than you would get at your local bank. 

Examples of banks that offer high yield savings accounts are:

I keep all of my sinking funds and emergency funds in a high yield savings account.  

The one caveat to online bank accounts is that it takes a few days to get at your money when you need it. If you need money right away, a credit card or line of credit can be used until your money is available from your high yield savings account. 

You Got This

It’s easy to convince ourselves that we don’t need an emergency fund. What could happen, right? 

But we all know life is uncertain. And if working to have a stash of cash to help us get through those bumps in the road can bring us some peace of mind and the ability to navigate those bumps, then having an emergency fund is worth it. 

Emergency funds are like personal insurance policies. You don’t know if you’ll ever need but you will be glad to have when the need arises. 

I’m glad I finally convinced myself of that, and I hope to inspire you to do the same. 

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3 Responses

  1. I also waited until way too late to have an actual emergency fund for many of the same reasons. We were earning enough that we could adjust and ride out most minor emergencies, and I had the invulnerable youth thing going for the major emergencies! I think our first official emergency fund was right around 39 too. We were just starting to shift to lowering it again when the pandemic hit, and now we’re actually expanding it. We do use it to grab some of the bank account sign-up bonuses when they pop up – so we’ve been through Discover, Ally, and Marcus.

  2. I’ve considering skimping out on an emergency fund for the same reason you mentioned about grabbing some money penalty-free from Roth IRA contributions. In theory, I could invest my current emergency fund and have more money in the market, while still having access to that cash if I need it. Instead, I prefer to think of my invested money as untouchable, even if it isn’t the most optimized way of doing things. It is frustrating though when those interest rates keep dropping and the cash isn’t doing anything for me. Enjoyed the post and perspective!

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Picture of Melody Creator of Cash for Tacos

Hi! I’m Melody and I want to help you create a vision for your life and provide you the necessary tools to use your money to make your vision a reality. 

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