The Dangers of Not Having an Emergency Fund

What do you do when you get a paycheck? Do you pay yourself first? Do you run to the mall? Do you pay your bills and end up with very little to save?

Picture this scenario:

A few years ago, I was bring home six figure income. It’s hard to imagine that someone with that income was living paycheck to paycheck, but that’s exactly what I was doing. I had a closet full of beautiful shoes and handbags, but very little else to show for it.

I went on vacation and when I got back, I came home to a flood in my apartment and my brand new wood floors were ruined. Apparently a pipe had exploded and while I was away, the leak had ruined my entire living room and was making its way to the bedroom. The leak was my responsibility and the condo board wasn’t touching it. I’d just blown almost all the money I had saved up on a vacation and was literally waiting for my next paycheck.

Guess what happened next… nothing.

I couldn’t afford to replace the floors, so I had no choice but to get the wood floor ripped out (the entire apartment) and walked around on unfinished floors for 5 months before got in new wood floors. Coming home was a very depressing scene.

I learned a very valuable lesson…

Emergency funds are a must

Not having an emergency fund is like driving without insurance.

If I had stashed away an emergency fund that I wouldn’t touch unless it really was an emergency, I would have been walking on new floors in a matter of days. An emergency fund isn’t just for things like that, think of all the people who never expected to get laid off from their jobs. Those who, due to an accident or illness, are ruined financially. Here are a few easy tips to get started.

1) How big should it be?

Most say that you should save about three months worth of living expenses. I would recommend aiming for six months. If you lose your job in today’s market, it can take six months or more to find a new job. The last thing you want to do is get desperate and take a job you hate.

2) Open a separate Account

It’s best not to include it with your other savings. It will just get confusing it you do. If you’re saving for a vacation or a wedding, have a separate account for that. I opened a new bank account strictly for my emergency fund and didn’t make it accessible through an ATM. That way, if I really needed to access it, I had time to think about if the severity of the emergency first.

3) Start off my small and stay consistent

You don’t have to save half of your paycheck. Even saving 5% of your paycheck is perfectly fine. It has to be a manageable amount every month. If your income fluctuates, save a percentage rather than a specific amount. The key here is to stay consistent. Savings only grow if you continue to save, so no matter the situation, save that amount every month.

4) Think hard before you using it

A sale does not constitute dipping into your savings account. Neither does a needed vacation after a stressful period in your life. This emergency fund should be used for a loss of income or a financial disaster.

The joy of having an emergency fund is the peace of mind it gives you. Just imagine the beauty of having an emergency fund that is a year or more of your expenses?

Do you have an emergency fund? How many months of living expenses would you like saved in your emergency fund?


Jen is a Headhunter who started her recruitment agency while juggling a $34,000 consumer debt. She decided to immerse herself in personal finance and managed to dig herself out of debt in one year. Jen writes humorously and candidly about her journey starting from the days she was swimming in debt to to debt-free living at

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