Emergency funds. If you don’t have one yet, start one today!

It’s important to distinguish between the different TYPES of efunds, too.

I personally have three (not broken up in different accounts, but seperate on my budget/net worth spreadsheets).

The first one is a ’small bump’ account – there’s about a month of take home in my checking account as I use the ’spend LAST month’s check’ technique for cash flow. It earns interest, but only a nominal amount. It’s for very small emergencies – like an unexpected vet bill or a medical expense that is not covered by either my insurance or my HSA guidelines. This would equate to Dave Ramsey’s “step one baby efund” or the “starting out” fund above.

The BIG efund is the ‘OMG, I lost my job!’ fund. It’s in a mix of high yeild savings (3 months) and laddered CDs (6 months) and it untouchable in my mind.

Then there are two midsized accounts – One for the house and one for the car. Used for repair bills, and eventually for a new (to me) car and house upgrades/renovations. This covers the roof, car transmission etc. These aren’t really EMERGENCY funds per se. You know your roof will need replaced, your car or washing machine or whatever will eventually die. You just don’t know WHEN. So these are more like an escrow account than anything. My goal here is to be able to replace my car with a late model used car every 5 to 7 years and to do a nice upgrade worth between 5 and 7K on my house every 3 to 4 years (next up – new furnace and AC!!!) The money for funding these is what I was spending at one point for a car payment and for CC debt servicing.

It would be fun to have more ‘play money’ in my budget, but having all my bases covered makes me feel better.