Apologies for the silence on my blog, it’s taken a while to switch my mind from paying off debt mode to savings mode. Now that I’m debt free there are so many things I want to save for, purely so I can avoid getting into unnecessary debt in the future.
A new car is on the cards because I’ve had my car for almost 7 years and it has more than 250,000 on the clock so I’m not sure how much longer it will last. Having said that, I’m going to save for a new car, but not going to buy one until my current car decides to pack up – I’m hoping that’s later rather than sooner.
However, at the very top of my list is building up an emergency fund. There are a couple of reasons I have put this as the most important. Firstly, I have never had an emergency fund before, which gave me nothing to fall back on when things went wrong. If something broke and needed repairing or replacing (for example my car or a household appliance) or if an unexpected bill came my way (dentist, doctor etc), I had to rely on credit to get by resulting in even more debt. Secondly, I am on a 12 month contract at work to cover maternity leave and my contract ends mid-November. Anything could happen come November but I need to have some aside just in case I leave my job and can’t find work straight away.
I know an emergency fund may not be as important to everyone but it’s certainly a good thing to have. There is no set amount an emergency fund should have in it, so I will be making regular contributions to this fund (which I have in a separate online account) and I don’t really have a plan to stop making contributions. I’ve read plenty of finance books in the past 18 months and most of them suggested an emergency fund should have enough money to cover your bills and living expenses for three months, but even better if you have enough to cover six months.
I’m aiming for six months but I’m taking it one step at a time, putting away an amount each fortnight and not touching it unless there is an absolute emergency! I’ve started by working out how much I pay for rent, food, power, petrol, insurance, warrant of fitness and car registration each fortnight, then multiplying it to get a monthly, three-monthly and six-monthly amount. In a separate table I’ve done the same for what my expenses would be if – heaven forbid – the BF and I were to go our separate ways. It’s not exactly something I like to think about but I’m trying to be realistic so I’m covered for whatever comes my way.
In order to keep myself on track and stick to the regular savings (and so I don’t touch it), I am crossing out certain expenses once I have that much in my account. It’s a bit difficult to explain so here’s an example:
|1 month||3 months||6 months|