Sometimes I wonder why I bother.

I’ve actually been planning on writing about the importance of an emergency fund for over six months now. The thing is, (and I promise I will just do my usual little bit of complaining and then quit whining) it just gets discouraging to write about things that have been talked about ad nauseum by so many blogger folks already - most of whom are 10 times more eloquent, or at least coherent, than I am. Here’s one example, from a finance blog I read regularly.

Geez. Like I said, why bother? That one pretty much covers everything I wanted to say.

I guess it’s because I’m just a glutton for punishment. I like to spend hours writing long-winded, useless articles that perhaps only 5-10 people - out of the few hundred who read this blog - will find interesting. I just love it! Love it! Sir, may I have another!

As you can see, I have a lot of grapes.

And they are all sour.

Well, since I’m not going to write the great American finance blog, I guess I’ll just talk about my own experience with emergency funds. And then I’ll go outside and mow the lawn while thinking about how I could’ve become rich and famous if I bought Microsoft stock in the 80s.

For me, the idea of having a Money Cushion, as I like to call it, revolves around two things:

1. Crap will happen.
2. Things are (often) not instantaneous.

Anecdote a la explanation: Around 2002 or so, I was laid off at my old job at [insert company name that rhymes with “phony” here]. It wasn’t like I had the most secure job in the world, but still it was quite a shock. Crap will happen. It’s the first time I’ve ever been laid off. I sort of took it personally - but that whole psychological mess is an article for another day.

In any case, we didn’t really have an emergency fund planned out for ourselves at that time. But still, we did have a good amount of short term savings as well as mid term savings like CDs. It was pretty lucky - as I’ve said before, I fall into the Aesop Grasshopper category. I’m pretty conservative when it comes to setting money aside. It’s just how I am. Spending a lot just makes me uncomfortable. So we sort of did have an emergency fund, even though I didn’t plan it as one.

However, at the time Linda was going to school - so we had pretty much no income beyond my unemployment and our savings. At the time, we were also paying off a (I admit, stupid) SUV purchase. I knew that I had to sit down and figure out exactly how long our savings would last.

Luckily, since Things are not Instantaneous, I knew that it would be a pretty long while before we were really in trouble. Despite the fact that bills come every month, it’s not like you’re going to get kicked to the street once you’re fired. Well, USUALLY. I’m a firm believer that if you’re laid off, you should take some time off before looking for another job. But again, that’s a story for another day.

So I calculated that assuming we didn’t find work, it would still take us over a year and a half to blow through our savings. That was the worst case scenario where we didn’t even find any part time jobs. Man, I can only imagine if it had happened NOW in the midst of the latest recession instead of back in 2002-2003. It might have been so much worse.

As it turned out, we DID use up a large portion of our pseudo-emergency fund. It was a bit scary, but we ended up finding some part time work after a few months. Gradually, we got to the point where we halted the bleeding of our savings. We had to cut a lot of other costs as well in order to make it work.

The problem was, since Things are not Instantaneous, it took a REALLY LONG time to recover to the point where we weren’t just using our entire paychecks to cover bills and living expenses. I would say that the worst time was around 2005, when we were working and yet just making barely enough to cover expenses. That’s a year I’d like to see wiped from the books. There was very little room to maneuver. If I remember correctly, we also had some unforseen medical issues that year too. Crap will happen.

So, it’s only from about 2-3 years ago where I’ve started to feel more comfortable about our financial position. As soon as it got to that point where we weren’t treading water, I vowed to figure out a better plan for an emergency fund and to stick to it. That real-life “experiment” of having to rely on whatever we had in the bank was enough to get me going.

So how much of a Money Cushion is right for you?

This sort of leads me to a third idea regarding emergency funds:

3. Any emergency fund is better than none.

Basically, the amount of money you want to keep in reserve for emergencies will ALWAYS be different for each individual (or couple). I’ve heard all sorts of different numbers, from the standard “Six months living expenses” to “Three months of your current paycheck”. I’ve heard tons of different takes on emergency funds - like, should you have set aside money for different types of emergencies (i.e. losing your job, health issues, unplanned kids when you’re 50).

I think it comes down to that point: any amount is better than none. And because Things are not Instantaneous, remember that if you set a goal of having X amount in your bank account as an emergency fund, you will generally NOT be able to achieve that right away. As it took us several years to build our money cushion back up, it will probably take you a little while (unless you happen to be rich, in which case, why are you reading this?) to achieve your goal.

And the time to start thinking about an emergency fund? That time was yesterday. Because Crap Will Happen. Remember that.

I’m really not going to go into how you should structure it, because as I’ve said, this has all been covered on other blogs and personal finance websites. But in case you’re wondering, we run approximately on a Six Months Living Expenses rule. Because I’m even more conservative, I like to run almost 8-9 months. What we do is we spread out that emergency fund among short term and mid term investment vehicles. I would consider standard savings, checking and money market accounts to be short term vehicles. Certs of Deposit, bonds, stocks would be mid term parts of the emergency fund - I’m hedging my bets that I won’t need to withdraw the money, but if push came to shove, I’d take the penalty and grab the cash from the CDs to help us.

Again, I’m no expert - this is just what we do. We don’t make any distinction between different “types” of emergencies. One “fund” is fine for us. I know some folks consider their IRAs, 401K, and other retirement accounts to be part of the emergency fund. For me, I don’t count those as part of our money cushion. No way. I’d never touch that part of our finances unless I had absolutely, positively no choice.

OK. My work here is done. If I help one person by getting them to think a little bit about saving for an emergency, that’s enough for me.

[Editor’s Note: P.S. You are going to be shocked, but I lied. I actually don’t mow my own lawn. Horrors. Also, I had to physically restrain myself for not making a joke about the term “Money Cushion”. The 14 year old, dirty-minded section of my brain just keeps repeating “The bigger the cushion…” What, you don’t know the rest? Yeah, right.]