Emergency Fund

I know we are not the best at managing money and we continue to use credit cards but I'm proud to say I finally have the Emergency Fund in place. I got the idea from Dave Ramsey who teaches to have at least $1,000 in emergency savings at all times. I took it a step further and created 4 emergency fund accounts:

Checking Account Emergency Fund: $1,000
Primary Emergency Fund: $10,000
Secondary Emergency Fund: $1,000
Job Emergency Fund (Unpaid Vacation 4 weeks): $4,000

The purpose of the Checking account emergency fund is to have cash ready with our bank. If something comes up I can easily transfer the money online. The cash sits in our savings account with no interest. This account is fully funded and has $1000 in there right now.

The Primary emergency fund is money we got from our insurance company back when hurricane Ike hit the Houston area. We never really used this money, I had it in stocks for a while and made close to $700 with it. The money is back in our FNBO Direct savings account and the interest rate is 1.50%. The primary purpose of this money is to cover home related emergencies like the roof or appliances going out. This account is fully funded with $10,000. The interest payment last month was around $15.00.

The Secondary emergency fund is not funded yet. This money will be paid out by my employer with the November paycheck. It is a yearly bonus payment and the spouse and I have decided to stash the money away in our HSBC savings account and forget about it unless we need it for a rainy day. As soon as the money is in my savings account I will transfer it to HSBC Direct account.

The Job Emergency fund is money I keep saved up in vacation at work. My employer provides 25 days of paid vacation. Normally I only use 8 to 9 days of vacation per year. The purpose of this emergency fund is to continue making our mortgage payment for 3 to 4 months in case I get laid off or fired. The money is paid out once I become terminated.

This is our emergency fund in a nutshell. There's a small issue we have, instead of taking money out for emergencies, we continue to just put things on credit cards! For example last week, my car battery went out and it cost $110 to replace. I should have taken money out of my checking account EF but instead I put it on Citi. I think the wife and I need to sit down and define exactly what we mean when we use the word "emergency".

HS