Saving For The Unexpected

by Nicole
Saving Money

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Saving for the unexpected; its what financial gurus call “the emergency fund”. At the time of writing this, 16 million Americans are unemployed due to the Coronavirus. No one could have predicted this. Think about the anxiety that millions of Americans are feeling right now because of loss of income. Although the Government has initiated a stimulus package, states cannot keep up with the influx of unemployment applicants etc. Establishing an emergency fund where you keep 3-12 months worth of expenses will greatly improve wellbeing during a crisis. 


The pandemic is affecting millions of people but emergencies happen on a daily basis. Medical emergencies, sudden job loss, family emergencies etc. impact individuals regularly. Although it is our hope that these will never occur, it makes sense to be prepared. Insurance exists to prevent us from low likelihood, high impact events, right? Why not think of the emergency fund as another form of insurance. 

Personally, I thought my job as a physical therapist would always be in high demand especially for the aging population. Never in my wildest dreams would I imagine myself unemployed and out of work indefinitely but here I am. 

Unfortunately, you cannot always predict what will happen in the world and where life will take you next. That is why the emergency fund is important. The mechanics are pretty simple but let’s first get familiarized with some definitions related to how to save for the unexpected.  


Fixed expenses: are those which are the same every month. Although some fixed expenses listed below may vary month to month, you can estimate by taking the average amount spent each month. 

  • Subcategories Include: housing (utilities, tax, utilities), groceries, transportation (car, gas, insurance), cellphone, internet/cable, pet care, healthcare, childcare

You get the idea…. 

Discretionary spending: extra money that is left over after budgeting for fixed expenses which you can use on things that make you happy. 

  • Subcategories Include: restaurants, alcohol, travel, clothes, makeup, gifts

Mechanics of Saving for the Unexpected

Acknowledging that every persons situation is unique, I will go through steps on how to save for the unexpected. I understand some people may not be ready to start this fund however do your best. Set an ambitious goal and continue to educate yourself. 

How to save for the unexpected: 

  1. Take a look at the last 6 months of bank/credit card statements
  2. Categorize each expense as either fixed or discretionary
  3. Next create subcategories for the two types of expenses (i.e restaurants, groceries, clothing)
  4. Calculate how much money you have spent each month in these subcategories (i.e $500 in clothing)
  5. Be honest with yourself. What surprised you about this list? Justin & I consider ourselves frugal but when we did this for the first time, we were met with considerable shock at the amount we were spending once we both had jobs. Lifestyle creep was real. Now that we track it, we can be really honest with ourselves and cautious to not over spend. 
Below is an example of my own 6 month budget estimator. Feel free to download this Google sheet here. You’ll need to download and save this document to your computer so you can edit it.
Saving Money

What If I Have Debt

I will talk about debt in a future blog post. Most people have some form of debt (mortgage or student loan) and it’s a personal choice whether you feel comfortable putting money into an emergency fund. That being said, I think this pandemic situation shines light on the importance of having even a couple months of savings stored away. 

When I was in graduate school, although I had minimal living expenses, I personally waited to pay off my loans so I could keep a small sum of cash in a savings account in the event an emergency happened.  

How To Save For the Unexpected: A Process

Set a goal for the amount you will add to your emergency fund based on what’s reasonable after looking at your expenses. I would begin by adding a larger sum of money to the account when you open it. From there, based on your budgeted money, see how much you can afford to add to that fund per month. Treat this emergency fund as another expense, except you’re paying yourself! This number does not have to be large if you already added a larger sum of money to begin. 

Most individuals will keep their emergency money in a high-yield savings account. I personally keep mine with Discover bank but there are a lot of options. Make sure that whatever you chose, you are able to earn interest on this money. Larger banks are often not the best option.


Protect Yourself From the Unexpected

Please remember, emergencies are fairly rare so don’t think you need to put in $1,000 right now. It can take time and some sacrifice to build up this fund. Everyones emergency fund will look different because it all depends on how much money spend per month. Remember this fund should contain anywhere between 3-12 month of expenses. Once you start adding money to the emergency fund don’t touch that fund unless it’s a true emergency as mentioned above. That will power is very important.

In summary, an emergency fund exists to protect you from the unexpected. Run the numbers, give yourself the hard facts, set reasonable goals for how much money to desposit and begin from there. It can be overwhelming, I understand, but it will prevent a lot of anxiety in the future. There is nothing more comforting than having your finances under control. Okay… maybe a hot stone massage is a bit more comforting, but you get my point. Goodluck guys, I’m here if you need help! Click here to contact me



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