I’ve spoken before about how I don’t think that emergency funds are a good use of my funds (can’t find the link now but I KNOW I did. In December — I swear!). This, of course, is a change of heart — back in March 2012 I was quite the fan of emergency funds — and for good reason. That spring I was working two jobs and my hours were highly variable. In addition, one of my part-time jobs was temporary and often paid me weeks late. These days, I have a steady job and income, low expenses, a TON of credit and ZERO need for an emergency fund.
Let’s run some numbers, shall we — assuming that I lost my job because of incompetence, or that I quit, or that I *knock on wood* was unable to work:
Rent + bills: $500
Cell phone: $67
Total: $667 (with no income, my student loan payments fall to $0 and so that payment has been excluded in this exercise)
Based on my current situation, including all the low-interest credit that I have, I can live for 73 months (6 years and 1 month). If I include my high-interest credit (credit cards), I can live for 86 months (7 years and 2 months). Again — this is assuming that I have NO income and NO public assistance.
Obviously this is unsustainable — despite A LOT of people in my life thinking that I’m cheap and don’t have fun, my monthly expenses usually run closer to $1500 than $667. That’s right… almost $900/month is spent on myself and things that I want — lattes, gadgets, nice meals out — as well as my transit pass and student loan payment. Could I really go 6 years without a fun new toy? What about 7 years without a vacation?!
Given that I have no emergency fund (seriously, my savings account has $41 in it because I buy too many things and invest too much money) — what would I do if I needed a quick loan in emergencies? I would resort to credit! Anything I charge to my credit card today will only come due on May 30th — I have a TON of time to make lots of money to cover that expense! And, if I don’t have the money by then, onto the line of credit it goes and, honestly, the $0.58/month per $100 borrowed isn’t really going to worry me — especially when my money is in the stock market and earning almost $5 a day (based on a 5% annual rate of return)!