Simple Peace of Mind (Part 3)

Two weeks ago I decided to start making a plan to work towards a three month emergency fund taking baby steps. In my effort to live simply, I need to have the peace of mind that comes with knowing that we would be secure for 3 months if one of us lost our job or became seriously ill (or if one of our kids became seriously ill and one of us needed to care for him/her full time).

To recap, the first eight months of the year:

During the first four months of the year, I planned to set aside $1,270. Some of that will be in the form of our food supply and some in winter clothes for next year (bought on sale). Read that post here. To recap:

January - finish off planning for our 3 month supply of food storage household goods (paper products, diapers, toiletries, etc.). Buy clothes for next winter on clearance. Total budget $300.

February - save for 3 months worth of gas costs for the house and car. Total budget, $450.

March - save for 3 months of phone/Internet/cell service. Total budget $520.

April - no cash outlay this month! Just manual labor stocking enough wood to last at least one winter (for heat) and investing in our garden to help produce fruits and veggies we can eat all year long.

During the next four months, I allocate $1,600. Read that post here. To recap:

May - Investing in canning supplies and saving 3 months of electricity bills, total budget $450.

June - Saving for our car insurance deductible and starting to save for life insurance premiums. Total budget $550.

July - Saving the remaining car insurance deductible and another month of life insurance premiums. Total budget $550.

August - Putting aside another month of life insurance premiums, $50. Canning tomatoes and other fresh vegetables from our garden and farmer's market.

(Note: I also talk about how we managed to set aside this money from our budget each month in this second post.)

On to the last four months of the year.

I wanted to keep tying each month's savings to a specific expense we would incur in a three month period, but I came to the conclusion that what we would need to spend would depend on what time of year it is. In the summer, we would need to cover our home owner's insurance, school expenses, and some annual home owner expenses. In the winter, we could be looking at Christmas, the spring would bring 3 of out of 6 birthdays and property taxes. Plus, at any given time we could need a car repair, house repair or some other thing. So, I have decided to just add to the cushion in general. It could be used for things like fresh foods (milk, eggs), kids' lunches, gifts, cheap entertainment, and the Murphy's Law items that seem to pop up when you can least afford them.

September - Life insurance premiums, building emergency cash supplies, $500. We will set aside another $50 for life insurance premiums (we don't want our kids to be without funds if something to happen to both of us). We will also put some cash in various places at home, so that we have cash in the event we need immediate access to it. I should note here that I am setting this 3 month emergency fund aside in case of OUR emergency, not a regional (storm) or nationwide emergency (terrorist attack or something?). But, in the event that something regional or national happens we could have to endure a few days of frozen banking activity. I do not think our money would be gone forever, but if there is a panic run on banks, the government would shut things down for a few days, so it would be good to have cash on hand in that case, too.

October - Life insurance premiums, pet food, more misc. items, $500. This month is likely the month we would be paying for Christmas (in real time, not saving for future years), so over the course of this year I will be aiming to sell items we do not need on ebay, Amazon or by having a garage sale. My goal is to come up with $500 by October that we can use to fund this month's goals, so that we can afford to set aside cash to use to purchase Christmas gifts.

This month we will set aside $50 for life insurance and the remaining $450 would be set aside as general cushion. Having cushion to handle these sorts of expenses could be the difference between making those mortgage and debt payments that we are counting on from the one remaining salary to provide for or struggling because we did not foresee these types of expenses.

November - Life insurance, more cushion, $500. Again with the life insurance and saving for those annual or unexpected expenses.

December - Life insurance, more cushion, $500. Again with the life insurance and saving for those annual or unexpected expenses.


So, there you have it! My careful plan to put aside a $4,870 plus 3 months worth of food and household goods. This should be enough to cover three months worth of expenses beyond our mortgage and debt payments. I also have a plan for debt repayment for the year, and as that decreases, we will reduce that burden in case of an emergency, as well, which would free up funds to cover even more expenses (assuming one of us keeps our job).

I am sure we will face obstacles along the way and I am sure that we will be pleasantly surprised along the way, too. But I really believe that if we set our minds to it, we can make some great progress. My plan is to recap our monthly progress on the last Saturday of each month, so please follow along. If there is interest, I could even start my first linked posts, so let me know if you are interested in that.

Someday I would really love to have a full 12 months of expenses (including the mortgage (or better yet, have the mortgage paid off)), but longing for that level of savings has prevented me from making any progress at all. It is so large, I just didn't know where to begin. By concentrating on these baby steps, we will make more progress than we ever have in our lives and we will remain focused on our goals of living frugally in an effort to provide more security for our family.

If you are so inclined, think about what tiny steps you can take (no matter how small) to help secure your situation, too. You could focus on one week's worth of expenses at a time or whatever you think you can manage. Remember that something is better than nothing and the confidence and pride you will accumulate as you make even the smallest of progress will push you forward to your goal of having some security.