If you are new to Simple Finance Mom, one of our most popular series is our monthly finance goal updates. In last month’s post, I shared a couple of setbacks we had that affect all homeowners at one point or another. You can read all the juicy details right here.
As we pursue a life of financial freedom using many of the principles taught by Dave Ramsey, I can’t help but be encouraged by the progress we have made in such a relatively small amount of time. We started with hardly any money to put towards our goals. Slowly but surely, we have been able to knock out one goal after another.
I don’t say all this to brag. I say all this to show you what one little monthly goal can do for your family, too! One goal met month after month, year after year, makes a collective difference in your overall financial picture. Each month brings you closer to reaching your own financial peace, whatever that looks like for your family.
Here are some of the big goals we have set over the past few years.
Goal 1 – Start a Beginner Emergency Fund – DONE! You can read more about our Baby Step 1 here.
Goal 2 – Pay Off Over $80,000 of Debt – DONE! You can read all about our Debt Free Story in this post.
Goal 3 – Build Up Our Emergency Fund – This is our current goal, and we would love to knock it out before the first of the year.
In last month’s financial goal update, I promised to share with my readers how we came to the magic “number” for our fully funded emergency fund. In an effort to inspire others, I would love to share how we came to a compromise on this.
BUT please keep in the back of your mind that everyone’s family is different. Everyone’s goals are different. While we can celebrate our differences, this little slice of blogland is a judgement-free zone. So play nice….
Many financial experts recommend a solid three to six months’ worth of expenses saved, while others encourage a hefty nine months to a year’s worth squirreled away for a rainy day. Still others say you should only save for a couple months in a liquid account, while investing the rest to grow your savings.
At the end of the day, you have to do what works best for YOU! Which is exactly what we did. Let me explain…
I would love to have six months of savings, especially that we are now primarily a one income family. But my husband is more comfortable with having only three or four months’ worth of expenses in our emergency fund.
The problem for me is that we have so many unknown variables due to having mostly one income, two older vehicles, being homeowners, and having a rental property. I mean did you read last month’s update? Yehhhhh, that one hurt to write!
If we’ve learned anything over the years, it is that we have to be a team. Always. Even when we disagree.
So we put our heads together and found a compromise that made us both happy. We decided we would start three different accounts for our savings goals. I know it sounds crazy, but hear me out.
One is our true emergency fund. We will never touch it! Ever. Until the unthinkable happens, like a job loss, or a car accident, or anything really major like that. We agreed to put four months’ worth of expenses here, and it is not linked to our online account. We have to physically drive to the bank to pull money out of it. Finance rule #231,907: Protect yourself from yourself.
The second account is strictly for our rental property. We have the best renters ever. Legit, they’re amazing and we are SO blessed that we have renters who see our rental house as their home. It makes my heart so happy! But it is an older house that sometimes likes to keep us on our toes.
We would love to put enough money in there to cover any major expenses, like the roof, plumbing repairs, the A/C unit, appliances, etc. We also want to replace the carpet in between every rental family, so we want to be prepared for that in case our current renters ever do move on. Which would make me so sad, btw. 🙁
Our rental savings equals about a month and a half of our monthly expenses in case, God forbid, we ever have to tap into it. If push comes to shove, we have more that can be used in our emergency fund. But by earmarking it as “rental” we are ready for any major expenses that come up.
I have to say, keeping our “rental” spending in a separate account has really been a plus. It has been easy to track exactly how much comes in and goes out because it is all in one place.
Our third savings account is a basic savings account that is linked to our online checking account. We will only keep about a grand or so in this account. Think engine problems, tires that need to be replaced, an unexpected home maintenance issue that will cost a couple hundred bucks.
It is linked to our checking account so we can transfer money back and forth as needed. This will also make it easier to replenish in future months. What did our parents do before online bill pay, y’all?!?! I mean really though!
All together, these accounts will cover about six months of expenses. We will have four months specifically saved that we will never touch, which pleases my husband. And we will have an additional two months’ savings that is earmarked for our rental property and other routine car and home repair issues, which was a cushion that is really important to me.
See, compromise is good!
To simplify things, I reference all of this together as our “fully funded emergency account,” but I thought some of you might like to see how we decided to divvy this savings up to meet all of our saving needs.
Last month’s finance goal:
Due to a couple of major unexpected expenses, our emergency fund definitely took a hit last month. We are so grateful we had the money in savings to help us out. But our big goal was to bring our emergency fund up to our pre-summer savings. Which obviously became difficult to meet.
How we did:
We weren’t quite able to make our goal, but based on where we started, I am still pleasantly surprised at our progress.
We started the month at 65% of our Emergency Fund, with the ambitious goal of bringing it back up to where we started. A whopping 83%. I knew the odds of this actually happening were slim to none. But I also wanted to challenge myself and shoot for the moon. You know, landing in the stars and all that jazz.
By the end of the month, we were able to bring our EF back up to 80%. As in 8. 0. I still don’t know how we pulled it off, but I’m so ecstatic we were able to make so much progress.
Next month’s finance goal:
Next month, we will be shooting for 85% funded. I would love to make it to 90%, but I also know that’s not exactly a realistic number.
Originally, we planned to have our EF fully funded by December, so I would love to close out the year with a new goal. I love our EF and the safety that comes with it, but I’m kinda tired of writing about it. #justsayin #firstworldprobs #judgementfreezone
What about you? Were you able to cross any goals off your list? Or have you had any major setbacks like we did these past couple of months? I would love to hear about your progress!
You can read our Monthly Financial Goals Update for May here.
You can read our Monthly Financial Goals Update for June here.
You can read our Monthly Financial Goals Update for July here.
You can read our Monthly Financial Goals Update for August here.