Friday, October 24, 2008

Great Reasons to Have an Emergency Fund

A friend's recent medical emergency reminded me that having an emergency fund can make a potentially stressful and expensive situation a lot easier to handle. If you do not already have an emergency fund in place, I urge you to start by setting up an automatic deposit into a savings account that you can easily access. Even having $20 in there will be able to help you at some point. Ideally, you would have enough to cover insurance deductibles at the very least. We've all heard about having 3-6 months of income available, which is a rather lofty goal, but every deposit should create a feeling of ease and lessen potential anxiety and worry.

1. A sudden medical problem for your or your dependents such as injuries, appendicitis, or an asthma attack can land you in the emergency room and chances are good your insurance has a hefty co-pay. Not to mention any prescription medicine costs and if you don't get paid if you miss work.
2. A car accident that causes damage of any kind will not be paid for until you meet your deductible. Just think what you would do if your car suddenly was not available. An emergency fund could help you pay for a rental or quickly arrange to have your car fixed if possible.
3. Theft of your your wallet, purse, or credit card means you will have a harder time accessing any money that you have. This is especially true if someone uses your credit card to make purchases. It can take several days and even weeks to reconcile your account and credit you with the money you lost.
4. A sick or injured pet can unexpectedly cost you big time. One of my cats had a seizure awhile back and the emergency vet charge was $74 just for a veterinarian examination.
5. Any household problem that results in filing a claim on your renter's/homeowners insurance such as a fire.

I can think of many other reasons but these are probably the most commonly-utilized reasons to take money from an emergency fund. Remember to only use it for emergencies.

Friday, October 17, 2008

Nothing like a little identity theft

Today I became one of the millions of people every year that is an identity theft victim. I was just checking my balance online on my checking account and noticed a charge from Wednesday of $21.99 from "Big Loud Head" in Florida. I googled the company and it turns out they sell headphones, not porn (lol). So someone got my Visa debit card number and then bought some stuff. Great. I called the bank first to have my card canceled. The woman on the phone was not very helpful for some reason, usually they have excellent customer service at my credit union, and I also had to go to the bank to fill out some additional paperwork. They informed me at the bank that I would need to file a police report and let them know the number of the police report before they can credit me back the money that was stolen. There are a lot of hoops to jump through here but I was more than happy to do all of this to ensure my information would continue to be safe. They informed me at the bank that this happens all the time and there is really no way to tell how someone got my number. I am glad I am meticulous with my account! Also, it is a common practice for identity thieves to charge a small amount, then wait a week or 2, and charge a much greater amount in the hopes that you won't notice the initial small charge. Just a reminder to be wary and pay attention to your accounts, even for small purchases.

Sunday, October 5, 2008

A great visual budgeting tool

I just discovered a great tool for comparing your current budget to expert recommendations.
CNBC's Carmen Wong Ulrich's Budget Calculator
Keep in mind this is very simplistic, but in my opinion, a great visual tool, especially if you're new to setting up a budget. Don't worry if your monthly budget does not match the recommended one, but it could be a good future goal to try and align your monthly spending more closely. I have heard various estimates like you should not spend more than 25 to 28% on housing, but the 30% here is a little more realistic and allows for a little more wiggle room if you are below the 30%.