Category Archives: emergency fund

Baby Step 3 Progress

It’s been a while since I’ve had any baby step updates. We have finally some decent progress to report.

Quick summary – In October we finished paying off debt (baby step 2).

We started our 6 month emergency fund, with a “50% of the way there” starting point.

In February, we reported we were at 53% of our goal.

Since that time, we are excited to report we are now at 65%!  After a slow period, we were able to increase 12% since February. We credit this to a huge shift in some of our expenses.  We were finally able to get our medical insurance figured out, so that decreased our monthly bills. We were also able to make some adjustments to our cellphone and electricity bills. The positive double whammie of lowering these bills is that 1. we have more money to go to the emergency fund each month and 2. our monthly expenses are lower than the total “6 months of expenses” emergency fund goal is lower.

Another important item to note is that we recently purchased a new (to us) vehicle.  And we stuck to our budget and paid cash!!!! 😀  So… we are now the owners of a nice, 2007 Honda Odyssey. It did mean that we had to use $9,300 that WOULD have gone toward the emergency fund. Obviously, that’s a decent chunk of change that would have increased our percentage saved, but we wanted to purchase a vehicle that would best meet our needs. And more importantly, have ZERO monthly payments.  My old jetta was getting up there in years and miles and VW’s are known for having expensive repairs. We hope to increase the size of our family in the next handful of years, which will also make the jetta obsolete. So we said good-bye, traded it in, and came home with a minivan.

Since October, it has been slower than we expected to make progress on Baby Step 3. However, we think we are in a good place.  With lower expenses, and one huge looming expense (the vehicle situation) already taken care of, we are set up well to make some large strides. Stay tuned…

 

 

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Emergency fund… slow going

So, we are now at about 53%* of our emergency fund goal.

While we have only saved 3% since becoming Debt Free in October, we are actually encouraged that we were even able to save that much. While money going out to pay for debt does not happen anymore, we have had significant increases in other bills.

We’ve had a few situations create bills we didn’t plan on. Diapers, along with the price of fresh organic produce for baby food (I’m making Z’s food), have been creating some instability in our budget. I’m still breastfeeding the kiddo and believe it or not, this means I eat way more food than I ever did while pregnant.

However, the biggest item that is currently holding us back is our medical insurance premiums. We estimate that for the three of us, our monthly premiums are just shy of DOUBLE our home mortgage. Yes, you read that right. Granted, our mortgage is not massive (we’ve been wisely living in a home that my hubby purchased 9 years ago and he did not bite off more than he could chew), but still… this is an increase of 1160% since January 2013. (gulp!) Yes, again, you read that correctly.

Some of this increase is quite understandable, I went from being fully covered, to having a very small amount taken out of my check, to being laid off. Tack on an additional family member and we were bound to see increases. We get that. However, this is an absurdly high amount. It did not help that during this time of life change for us, the insurance market went into total meltdown/chaos. Our insurance broker even told us “Sorry – I can’t help you. I have no idea how to answer your questions at this point and I might not even be in business in a few months.”

That being said, we are working on a couple of options and hope to see our monthly premiums decrease significantly in the next couple months as we work to make changes. AND we are so thankful to be out of debt. Again, the margin created by not having debt and not throwing money away on interest, has allowed us to weather this medical insurance storm.

*100% will be 6 months of expenses as suggested by Dave Ramsey’s Baby Step 3. We saving 6 months over because we are a small business family where income is not always the same every month.

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Where are we now

WOW! Did I really go an entire month without posting!?!

In 8 years of blogging that has only happened a few times.

I guess after doing 22 “by the numbers” and not having much to report – I took a little break.

As far as our emergency fund goes, it’s about the same – 50% done.

We did have our foundation fixed which cost 3,700 so – that was money that DIDN’T make it into the emergency fund (but it also didn’t create more debt since we cash-flowed it).

Other than that November was crazy busy!

*Z had 2 doctor’s appointments and I had one.
*We went to the Bush Library Museum & the Perot Museum
*My Parents came for Thanksgiving.
*I made my first Thanksgiving Dinner
*My brother and his family moved back to Texas
*We helped them get some painting done
*I had a birthday and we had our third anniversary.

What a great (and exhausting!) month it was.

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What’s Next?

When I blogged about our goal for 2012, we started out by saying we were going through Dave Ramsey’s Financial Peace University.

From that, we learned the 7 baby steps. Getting out of debt (all except for our house) was only step 2. We have a long way to go. 🙂

So what’s next? Naturally, step 3, which is a fully funded emergency fund. Dave recommends is 3-6 months of expenses.

I wanted to lay some ground work for this step.

First, we will be going for an entire 6 months of expenses for our emergency fund. We felt that with the feast or famine nature of a small business, it would be better if we had 6 months.

Secondly, I will not be posting exact dollar amounts when I report on progress for this step. We felt it was a little to personal of financial information to have out there in the world, letting everyone basically know what our monthly income averages. Instead, I will be reporting using percentages, with 100% fully funded being the obvious finish line for this step.

Third (and you might get mad at us for this one), our first progress report on this step is…
We are now at 50% of our goal.

Say what!? Ok, here’s why. Baby step 1 is a $1,000 emergency fund. From the get-go (prior to our even being married) my husband has been a super saver. When, in our second year of marriage, we talked about starting the baby steps, we decided that it was ok to continue to hold the 3 months of emergency fund aside that he already had in savings and to not put it toward debt at that time like Dave says.

A few things influenced this decision.

1. The potential extreme swings of income with a small business. We did not feel at all comfortable with such a small emergency fund.

2. Part of the reason Dave says $1,000 is for motivational purposes. If the emergency fund goal in step 1 is too big, people will become discouraged while saving for that first amount and give up. Since we already had the money, this wasn’t an issue.

3. Dave really wants to put a fire under people. There can be a little bit of panic in the idea that you only have $1,000. He likes people to use that panic to their advantage and start hustling on step 2 so they can finish and get back to saving. We knew ourselves well enough and trusted that we would not have an issue hustling.

4. In situation of overwhelming amounts of debt, taking a large chunk of change out of savings and throwing at debt can be a tremendous leap forward, helping people start the process with great momentum. Before we started in January of 2012, we had an incredible Q4 of 2011. We had a great boost of momentum without raiding the emergency fund. And for our total amount of debt, it would have had only a small impact on the timeline and reduction of interest we paid.

There you go. Our intent was not to be dishonest. And with the last 22 months in the rear-view mirror we know there were a few moments where we really thought even our “Crisis Fund” would be used up and we’d have to dip into the emergency fund. Not blogging about the emergency fund helped me keep it out of sight, out of mind, so that we would continue to hustle.

We are thankful that we gave ourselves some grace, and modified the Baby Steps from the start.

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Filed under baby steps, budget, by the numbers, emergency fund