Foreign funerals and emergency funds
Because worrying about ArriveCan and security is bad enough
Last week was a busy one. I left the country to go to a family funeral. It was a whirlwind visit, there and back in less than a week.
That meant I was off my newsletter and (really, all) off my schedule. I was going to post part two of “So you’re about to be single” but as I said, out of the country. (It’ll be in the next issue.)
But while I was mindlessly checking my email, reading about the U.S. sliding into a recession, I saw this post from Erin Lowry of Broke Millennial: Don’t raid emergency savings to pay off debt.
That post and my trip had me thinking—not about raiding my emergency fund to pay off debt, as I’m not quite there yet, but why it’s so important for a single person to have an emergency fund.
As Erin said in her post, by March 2020, work for many people was drying up or put on pause. The same thing happened to me around April and May of 2020. A lot of my clients paused their assignments because they didn’t know what was happening with the pandemic and the lockdown.
It was nerve-wracking, wondering if I was going to have to either find new clients during a pandemic or find a job.
I found myself looking at my bank account nearly every day and doodling calculations to figure out how much I could cut my budget, just in case.
I tend to worry about money, so I was concerned even though I did have an emergency fund that would cover my bills for about three or four months. Plus I had a line of credit and worst case scenario, my credit card, though I would prefer to avoid credit card debt due to the high interest rate.
This was before CERB, which I did take for two months until, fortunately, work picked back up. But I was ready to tap my emergency fund with my eyes closed and jaw clenched.
That’s the thing with being single, you are IT for the emergency fund. There is no other income to rely on because you have to pay for everything. That includes takeout or food delivery in case you’re sick and can’t run out to the grocery, and your daily living expenses that don’t get paused even when you’re not working.
So let’s talk about what I did to start building my emergency fund.
First, I figured out some basic math. I knew I wanted to save about three months, so I took that number and divided it by my pay periods to know how much I could save per month.
Just remember to look at your net income, not gross.
Now my income fluctuates on a monthly basis so I tend to put a percentage aside for my emergency fund. I average it out at about 10% of my monthly earnings. That way, I’m contributing something to my emergency fund no matter what I make that month.
If I find I have extra income in a month, another option is I’ll put most of the amount from one my smaller freelance gigs straight into my emergency fund (after withholding taxes and HST).
Right now I have about six months saved, which is why I could afford to not work for a week due to the funeral and say yes when an editor offered to reassign an article.
I’m hoping to have a year’s worth of emergency funds saved in the next two years because I would feel better having that cushion and it would give me the option to refuse work if I don’t want to.
I’m confident that I’ll get there because I’ve figured out a plan that works for me and I’m already in a savings rhythm.
If you already have an emergency fund, the next step is to figure out where to put it. A TFSA or a high-interest savings account? Perhaps a short-term investment like three-month GIC which offers a slightly higher interest rate compared to a HISA but that negates the having of liquid cash as most GICs are locked. Maybe part of it?
Right now it’s sitting in a Wealthsimple savings account but it’s something I’m going to ask my financial advisor when I next speak with her.
As always, talk to a professional financial advisor to help make a plan that works for you, your lifestyle, and your goals and let me know if you have an emergency fund payment plan in place.
Part of me is pleased I have it but part of me really didn’t want to use it because it took so long to build it up to a point where I feel secure about it.
(Is it weird to not want to use an emergency fund or is it just me?)
This week’s readings:
I can’t relate and I don’t care to but I appreciate the breakdown. Sydney Sweeney on Fame, Hollywood Fakery and the Pressure of Paying the Bills (The Hollywood Reporter)
How this 30-year-old paid off nearly $50,000 in debt in less than two years (Toronto Star)
Ambition isn’t only related to working for a company. A bigger paycheck? I’d rather watch the sunset!’: is this the end of ambition? (The Guardian)
Falling Food Prices Ease Upward Pressure on Global Inflation (WSJ.com)
The Aging Student Debtors of America (The New Yorker)
I… this headline. I clicked it though. Investing in Real Estate as Self-Care (Nytimes.com)
With the cost of living rising, people share 'inflation hacks' to combat higher costs (CBC)
(Thank you to Laura Fitch, Gail McInnes and the board of directors for reviewing this post.)