Saving for a rainy day

One of the first things most personal finance gurus tell you to do is start an emergency fund. But what is an emergency fund: it’s a easily accessible stash of money that is dedicated to emergencies only. It’s not regular savings that you can use as a down payment for a car or something. It’s dedicated to real emergencies like sudden unemployment or medical problem not covered by your insurance. So how much should you put away money. That really depends on your situation, some experts suggest saving 6 months to one year salary which is a lot of money. For me it’s just 2 months worth of essential expenses. I’m very well covered by insurance with renters insurance, car insurance, life insurance with AD&D coverage. Against unemployment I combat by being very desirable in the job market. If my current employer would cease to need me I know I can always go back to Europe and find work there very easily. All I need is to be able to handle the relocation costs. Also in addition to all that I have fairly low interest credit available in Europe and I can defer expenses on my Amex which I currently do for everything I possibly can and that even yields to pretty nice cash back once a year.

I’m writing this because I’ve finally replenished my emergency fund as my savings took pretty big hit for moving first from Finland to Germany and then to USA. Both moves had a lot of expenses I hadn’t for seen before. Shipping my stuff from country to country wasn’t cheap but the biggest hit to my finances was caused by the fact that I had absolutely zero credit history in US even though I already had a social security number from the time I was studying here. I had gotten used to certain lifestyle so starting from zero wasn’t easy. I had to pay a huge deposit on my first apartment and getting a car loan wasn’t cheap either and I ended up putting a $12k down payment. On a plus side the car is pretty soon paid off. Also I had to buy furniture and appliances which weren’t cheap either. I guess I could have bought a cheap used car and rent an apartment from a more sketchy side of the city but that’s not why I moved to US. I wanted a better quality of life and it didn’t come cheap.

Now that I have my emergency fund done I can concentrate on saving to down payment on a house. I’ve factored my savings into my budget and as I payoff existing loans that number is just going to increase. Part of my savings include money that I put my brokerage account and that’s dedicated to investments. My Charles Schwab high yield savings account only gives 0.25% interest on my savings so I use my investment fund to try to get better return on the money to combat against inflation. I don’t expect that money to be always available because the investments may loose value. I also like the investments because all the money I have on my brokerage account is hidden from Mint as available money where as savings are shown so it may make it tempting to spend the money. I may end up putting my emergency fund in a CD or find some other low risk investment that can be liquidated easily.