Fribble Get Thee an Emergency Fund!

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By "Markoose"
November 21, 2001

[This classic Fribble originally ran on Aug. 28, 2001.]

Get thee an emergency fund, fool! Yes, that is 'fool' with a lowercase 'f'... because you are certainly a fool if you do not have an emergency fund of at least a few months' worth of living expenses.

So why do I say this? Because in a rather surprising move to me and many of my co-workers, I was laid off yesterday. And as luck would have it, there is nobody to support my butt except myself.

Well, fortunately I have some cash in the ol' savings account, plus a check of three weeks' worth of work coming to me, plus unused vacation time of about a week that I will be reimbursed for. Of course, there is always the possibility of collecting unemployment benefits for a while. (Hey, I paid my fair share of taxes over the years to earn this, even though the Fool has helped me to lower them by taking advantage of vehicles such as IRAs.)

My short-term savings may hold me up for a while, but not as long as I wish they could. The once-red-hot economy has turned ice-cold, yet the rent is still due every month, the car payments won't stop for a while, and the bills of everyday-living never cease -- until I do, which is hopefully many decades down the road. (You see, I'd like to live a really long life so I can enjoy the magic of compounding.)

Of course, there is also my depressed portfolio I would hate to tap into, as much of it is underwater just a wee bit (see the 2-year chart of the Nasdaq to get an idea on this one). And, gasp, a squeaky-clean credit card is at my disposal if it should ever come down to that. Thankfully, I lowered my interest rate on it several months ago, even though I don't carry a balance on it every month.

Also, I finally smartened up and quit smoking a month and a half ago, thanks in part to the Quitting Smoking message board here at the Fool -- so I've been saving and will continue to save some dough... and my health.

Despite this bad news that's probably just a blessing in disguise, I think there is a good chance I could pick up a new job rather quickly. Guess it helps to do great work and leave on excellent terms with previous employers who would jump at the chance to have you back. However, the job in question probably won't pay as much as my most recent one, and it would be a much longer commute. But money is money. And if it doesn't work out, I guess could "Ask The Headhunter" here at the Fool for some advice.

As the title of this Fribble urges, "Get Thee an Emergency Fund, fool!" Because odds are, you will probably need it at least once someday. The economic climate can change as often as the weather in New England. And as I can also attest to, Living Below Your Means will definitely help you establish something for a rainy day.

Fund on!
-markoose, with his umbrella up, ready for another adventure

[Psst... for more on how to save for your emergency fund, check out our short-term savings center.]