What is an Emergency Fund, and how can you build one?

What is an Emergency Fund, and how can you build one?

Let me tell you a story about a girl and her broken car, the girl being my 24-year-old younger self and the car being my 2002 Golf, AKA Silver Sally.

It was a sunny Sunday Auckland afternoon, I was driving Silver Sally to the supermarket – the windows were down, the music was up and life in this moment was pretty good.

I pull up to the traffic lights. Somewhere in between the lines of “ohhhhh, we’re halfway there” and “ohhh ohhh, living on a prayer!”a beat chimes in – it went something like “thud, thud, thud, errrrk” then silence.

Sally was broken.

Literally the only phrase to describe this moment was “Oh fuck”.

Toots were blaring out as I sat stagnant in the middle lane, but I get her started again and head to the nearest mechanics… panic sets in.

Like a fish out of water there I was, standing in my dress and sandals on the oil-slicked mechanic’s floor.

“You alright miss?” the mechanic asks. I explain the situation about my golf…”ok sounds like you’ve got a real problem here!”

“What could it be?” I say, as if just by looking at her he could tell, like some sort of mystical car-reading mechanic.

He lifts up the bonnet, a turn here, a knock there…

“Well it’s hard to say miss, it’s going to take some investigating”.

All these feelings were whirling in my head.

“Investigating? What does this mean?”

“Surely it won’t be that much, maybe she just needs some new oil”

“But what if it’s something bigger, what if she needs major surgery!?”

“I can’t afford this right now”…

My problem, I wasn’t prepared.

Living in Auckland is almost impossible without a car, I needed to get Sally fixed but I didn’t have the money.

I was naive in thinking these kind of situations wouldn’t happen to me, I thought any expense i’d know about ahead of time, but the reality is life happens – your phone breaks, you lose your job, you become unwell, or like me your car kicks the bucket.. it happens to all of us and we NEED to switch our thinking and plan for these emergencies.

After a day of mechanical investigating I heard the news, I needed multiple parts to get Sally going again. The cost, $920 NZD (1/3 of the cost of the car itself), the solution? Put it on the credit card which meant more debt, more hurdles and heading further away from financial stability.

I never wanted this to happen again.

The solution? Build and Emergency Fund.

What is an Emergency Fund?

An Emergency Fund is VERY important to personal finance, because of the very thing its name suggests. It helps you in an emergency.

It needs to be there to help you with life’s hurdles – you lose your job, you get sick, or like me your car kicks the bucket. Without it you cannot have financial stability, full-stop.

How much should an Emergency Fund be?

This varies depending on your living situation, but generally $1,000 – $2,000 is a good place to start.

There are two types of ‘Emergency Fund Buckets’ to aim for:

  1. Everyday fund: $1k-$2k amount for an everyday emergency.
  2. Long Term fund: 3-6 months of your expenses for those greater emergencies like job loss or an illness.

If you are paying off debt or have little savings, start with $1,000 and build from there.

How do you save for an Emergency Fund?

Here are 8 tips to help you save an Emergency Fund:

1. Set your goal:

  • Set a goal for how much you want to have in your Emergency Fund, and by when?
  • These could be daily, weekly or monthly-based goals.
  • In my personal experience it’s good to have an end date in mind for your total savings amount, and then break this down into smaller more manageable amounts to save each week or month.
  • Be realistic, start small to get yourself in the habit of saving. Then overtime once you’ve developed a good practise of saving you can increase your goal.

2. Keep it separate:

  • There’s no point saving for an Emergency Fund if you keep chipping into it for new clothing purchases, and coffees (I can’t deny caffeine is an emergency, but get yourself a good plunger and grinds and you’re cool).
  • Keep this fund separate from your checking account, this could either be in a separate savings or bank account.
  • Do not put your fund into an investment or Term Deposit that’s too hard to access, as in an emergency you’ll want to be able to access the money right away.
  • Remember your Emergency Fund should be hard to reach, but still liquid.

3. Treat it like a bill:

  • Treat your Emergency Fund like a bill, make it a non-negotiable.
  • Add it to your line items on your budget and stick to it.

4. Extra Income:

  • Any additional income you get put it into your Emergency Fund.
  • This could be a tax refund, bonus, or gifting money.
  • If you put this towards your Emergency Fund straight away you won’t be tempted to spend it on other things.

5. Celebrate key milestones:

  • Saving for an Emergency Fund is not easy, it’s a hard slog at times so it’s important to celebrate when you hit key milestones.
  • This could be with your favourite bottle of wine, a trip to the movies, or a new coat of nail polish… whatever you choose.
  • Having key milestones and celebrating these will keep you focussed and motivated to stay on track.

6. Budget category allocations:

  • Take a look at your budget categories and where you are spending your money, and define where you could make changes.
  • Think creatively, i.e. instead of going out to restaurants or getting take-out twice a week, try cooking at home.
  • By contributing $10 more to your supermarket spend each week and cooking at home, you could save yourself $40 a week on take-out and restaurants, meaning that money can go straight towards your Emergency Fund.
  • Then next month change it up. Use Uber a lot? Try taking public transport more often.
  • Be creative and have fun with these challenges!

7. Cull unnecessary expenses:

  • Additionally to moving money around within your budget categories, take a look at where you are spending your money and cull the unnecessary expenses.
  • These could be things like monthly subscriptions, a gym membership you don’t use or buying coffee everyday (tips on how to do this here).
  • These small amounts really do add up, and will help you get to your Emergency Fund goal sooner.

8. Create a side hustle:

  • Get creative, think about the skill sets you have that you could leverage to make more money.
  • Could you do babysitting? Sell items you no longer need? Are you good at crafts, cooking, or baking? Do you have a passion and knowledge for something you could teach others about?
  • Some of the side hustles I did to make extra money were making candles, up-cycling vintage clothing, and writing product reviews for an online magazine.
  • The options are literally endless if you keep an open mind and are motivated enough.
  • Who knows… your side hustle could even develop into a thriving business.

Remember setting up an Emergency Fund is fundamental to your personal finance journey. It’s a gift to yourself, to provide you with freedom and flexibility to do what you want and most importantly to give you that peace of mind to know that you are prepared for those unexpected expenses.

Now back to Silver Sally.

She’s doing well, she’s recovered and lives in my parent’s garage whilst i’m in the UK. I’m heading home this year for a visit, so i’ll take her for a drive, put some Jovi in her speakers, and if she does decide to have a mechanical moment this time i’ll be prepared, I won’t feel like a fish out of water anymore.

THE LADDER GIRL

The things I no longer buy to simplify my life

The things I no longer buy to simplify my life

Lately I seem to be focusing a lot on ‘things’. Reflecting on what they once meant to me, and how I clung onto these things as if I truly needed them to be better – A better person, more attractive, happier, more intelligent, more organised, entertained….you get the drift.

The reality is there’s not much in the world we actually need. We survived the caveman years living off what we could muster, and now turn the clock forward to 2019 and we’re ‘surviving’ off overindulgence/over everything…more, more, more!

We think we need the grams, the likes, the wiz-fix creams, trendy gadgets, and the latest and greatest. We don’t, we can live a simpler life and be happy, even happier.

I’ll admit, simplifying your life and the ‘things’ you let in isn’t easy, it takes time to retune your brain to turn these ‘needs’ off. It takes a plan and constant checking-in with yourself, but what you get back in return for sticking to it is more time, money, happiness and a chance to breathe!

After going through my own journey of simplifying my life I know longer need these things I once clung onto for ‘dear betterment’.

So here goes, below is a list of things I no longer buy to simplify my life:

Food & Drink:

  • Frozen ready-meals
  • Pre-prepared vegetables
  • Bottled water
  • Health bars
  • Energy drinks
  • ‘Trendy’ foods
  • Takeaways (Except the odd late-night Kebab shop visit)

Clothing & Accessories:

  • Fast-fashion
  • Anything ‘on trend’
  • More than enough socks
  • Costume clothing and jewellery
  • ‘Going out dresses’
  • Multiple handbags and purses

Beauty:

  • Sprays for this, that, and the other issue I didn’t realise I had?
  • Highlighter
  • Coloured eyeshadow (no one wants to see me with purple lids)
  • Body wash
  • At home hair dyes
  • Eye cream (I have one good quality moisturiser)
  • Nail polish
  • Makeup remover

Household & Other:

  • Room spray
  • Fabric softener
  • New technology (quality second-hand is just as good)
  • Subscription upgrades
  • Magazines

Intentional spending doesn’t mean depriving yourself of the things you love

Intentional spending doesn’t mean depriving yourself of the things you love

Last week I wrote this post, which talks about my own journey in becoming more intentional with my spending and buying less ‘things’.

But what I want to focus on today is how I go about bringing new things into my life, the principles I use when buying things, and how you too can apply these principles to ensure what ‘things’ you spend your money on are adding value to your life.

What do I mean by ‘things’?

I’m not talking about the kinds of things that at a human level, we need. I’m talking about the kinds of things that bring colour into your world, that light it up, and that make it a unique place, a place suited to you!

You might get your colour from..

A beautiful painting, classic leather jacket, a new novel, old-school record, paint brushes, plants, headphones, beautiful crockery, a guitar, bike, antique chair, camera, even someone else’s junk… the list of these ‘things’ is truly endless.

These ‘things’ are important.

Things help us express who we are, to be creative, learn, grow and enjoy life. A world without things is possible, sure, but damn it’d take the rainbow away.

So, how you can have these ‘things’ and still be intentional with your money?

There’s a common misconception that if you’re a frugal person then you’re cheap, you live without nice experiences or nice things and i’m here to tell you that’s simply not true…

You can have these things, if you have focus.

The above image captures the ‘things’ that I bought into my life over the past year. These are things that added value to my life, that were thought about and that I treasure. I applied a series of principles to my thinking to ensure there’s no throwaway fast-fashion trends, no impulses, no things gathering up dust in the drawer, and nothing gone to waste – And that to me is so important.

To help give you focus to be intentional with what ‘things’ you bring into your life, here are my top 4 tips:

1. Know your style:

  • It’s important to know what your personal style is, what you like and don’t like, as by doing so you’ll have a set of criteria to measure against when deciding on what new items to bring into your wardrobe or home.
  • To help you define your style this post has some helpful tips and tricks, or you could use a platform like Pinterest to create boards for different areas such as interiors, clothing, gardens, makeup etc, and pin what you like to give you an overview of your style across these areas.
  • By having clarity on your own personal style, instead of going into a store and seeing thousands of items and trends and buying something that you may not truly like, you’ll be able to focus on the items that align to your own personal style and make better purchasing decisions.

2. Quality over quantity:

  • When buying a new item, it’s better to lean towards the cheaper option right? Well not quite.
  • Sure, in the short-term you’ll have the item and had paid less for it, it’s a win-win, until that item wears out and you’re having to replace it a few months later.
  • By buying an item because it’s cheaper, it’s not being smart with your money, yourself, or the environment, and to help get the point across let me pull out 2 coats…
  • Let’s say you buy the first coat for £25, you use it all through Winter and at the end of the Season it starts to lose its shape and pull. You wore it a total of 40 times at 63p per wear and that’s the end of its life. Next Winter you’ll start again with a new £25 coat, and so on.
  • Now let’s say you buy the second coat for £100, you use it all through Winter and at the end of the Season it’s still standing strong, so you use it the next Winter, and the next, and so on. Over 4 Winters at 40 wears per season, that’s 160 wears and 63p per wear.
  • Now, you might think it’s the same cost-per-wear so there’s no difference between the two coats. But the coat that cost you £100 is delivering far more than just cost-per-wear. It’s made of a good quality fabric that is sustainably sourced, is a brand you love, that pays its employees a fair wage, fits you well and there’s one of them across 4 seasons.
  • Whenever you can, invest in an item, it’ll last you longer and you’ll get so much more than just the item out of it!

3. Know what brands and stores you love (and stick to them):

  • Much like knowing your style helps you to narrow your focus when making new purchases, so does knowing what brands and stores you love.
  • Make a list of the brands and stores you really love and buy 80% of the time within these. I keep a list on Google Docs and add to it each time I come across a new brand or store I love.
  • By doing this you’ll start to collate your own personal ‘mall’, and avoid going into stores that don’t align to your values or style.
  • It might sound simple, but it’ll save you a tone of time and almost always ensure what you buy you’ll love.

4. Give it time:

  • See an item you love and want it now? As much as you might want to buy it then and there, walk away (close the window if online) and give it 48 hours. If you still find in 48 hours you’re thinking about that item, if you can afford it and it fits within your budget allowance then buy it.
  • Most of the time however you’ll find after that period you won’t have it on your mind, which means you didn’t love it as much as you thought you did, and you can put your money into something else that you will.
  • Time is important, it gives us clarity and reduces those impulse and in-the-moment purchases we so often end up regretting, use it to your advantage.

I hope you find value in these 4 principles, and that they help you to buy more intentionally and to bring things into your life that you truly love. Remember being intentional and frugal with your money doesn’t mean restricting yourself of the things you love, but it gives you focus to bring in only the things that you truly do (and less of the stuff that you unintentionally don’t).

THE LADDER GIRL

Why I stopped mindlessly shopping and own less things

Why I stopped mindlessly shopping and own less things

I used to love to shop, and I mean shop! I’m talking about the kind of shopping where there’s no intention, no list, no vision other than to mindlessly wander around a mall spending. It was about that instant gratification of having new stuff, things, this-and-that to fill my home and for a brief moment, comfort me.

A new cushion for the couch (already overdressed with an array of textures and colours), or that beige Zara top, a colour I had never worn well with a skin tone as pale as an uncooked chicken (thankfully aided by Bondi Sands when Summer rolls around).

What I was doing wasn’t healthy, not for myself, my partner, my bank account or my mental health. I was buying things without a thought, and in return, they were giving me nothing back, and neither was I.

This needed to stop.

It wasn’t overnight that my habits changed – like many things it took time, many conversations, sifting through my things, analysing my spending, looking at photographs of myself. Who was I? What did I value? Where did I want to go? All these ‘things’ were a result of me not knowing these answers.

I needed to define my ‘why’.

Seeking change and a challenge, my partner and I decided to do what many Kiwi’s do in their 20’s and move to the UK. Why? Because we wanted to become more resilient, more confident, and to experience new cultures, people, and challenges that Auckland at the time didn’t offer us.

The change.

To get there we made many changes, which forced us to be more intentional – no longer could I walk through a mall mindlessly spending. The cushions and beige top needed to go.

We moved into a tiny house (7×3 metres) to save on rent, which meant downsizing – It meant researching and discovering new processes and ways-of-living I had never heard about before, all to get us to our goals and to minimize what we had…

I discovered these movements:

  • The Tiny House Movement
  • Minimalism
  • Capsule Wardrobes
  • The Fire Community
  • House Sitting
  • WWOOF

These new learnings aided and pushed me forward. Yes, they helped us save to go to the UK, and they stopped me going into malls, buying without intention and owning things for owning-things-sake. But they also taught me the beauty of less, and to value more what we so often take for granted. My friends, family, education, and opportunities – these are the things that gave back to me and in return, I can give back to.

Owning less will give you so much more.

Owning less is not about depriving yourself, it’s about being more mindful with the things you have and the things you buy.

Next time you go shopping, go with a plan, think what do I need? What do I like? What brings me joy? Does this purchase align with my goals? And if you keep this in mind I promise you there will never be a mall visit without intention or a rogue beige top finding its way into your closet.

THE LADDER GIRL

The year I got my shit together by creating a budget

The year I got my shit together by creating a budget

Turn the clock back to 2016. When Ed Sheeran was serenading our speakers, cauliflower steaks were all the rage, legends were lost  – Bowie, Prince & Glenn Frey to name a few, and we got Trumped. It was a year of great gains and great losses.

It was a year of uncertainty, of instability and a reflection of my feelings in my own life. I decided to not let these feelings carry through into 2017, but to take control of what I could, starting with money.

I’d never been one to care much about where my money went, or what I did with it. I got my paycheck and very quickly converted it into superfluous purchases – Bento Boxes, Free People clothing, debt payments, plane tickets, weekend trips away, and lots and lots of coffee. Not surprisingly at the end of the month, I had nothing left.

My problem – I had no visibility of where my money was going, and I quite simply didn’t care.

If I wanted to take control I needed a goal, and I needed a plan to get there.

The goal, move to the other side of the world (I’ll do a post about that later)

The plan… I still needed one.

I Googled, I YouTubed, I Podcasted, I asked, searching for that hidden gem of an answer – but time and time again one simple thing popped up that we’ve all heard about before, The Budget.

It’s a very simple task – you write down your income, you deduct your expenses and then you see what you have left to play with.. this is either your Bento Box money, or it’s your savings money (more posts on this later).

It’s something so simple, but so many of us don’t do it. I used this very basic Excel template to build my budget, and still do to this day.

What the budget gave me was a plan to meet my goal, 2019 and 3 years later I’m in London. Granted there are days when I don’t always feel in control, but by having a budget I can plan and build a pathway to financial freedom.

It’s this very simple tool that got me going and that’s opened my eyes to a world where you can take control, you can have choices, and you don’t need much to get there!

What’s my new goal? To spread the word, and help others build their own pathway to financial freedom.

THE LADDER GIRL