Baby Emergency Fund – Do It Your Way!


Options To Consider When Saving To Achieve The Maximum Emotional Impact

For well over a year as I have been doing the plan myself, I have been paying attention to how people respond to doing or possibly doing The Total Money Makeover.  I have coordinated and lead 2 successful FPU workshops, spent some times facilitating the FPU forums, been a member of the forums, and listened to many friends.  I have heard people that had no savings yet, say that they didn’t think $1,000 was possible, while others have said it wasn’t enough.  Saving money is tied to emotions, and one thing that is true is everyone has them.  Positive or negative, happy or sad, secure or vulnerable you’ve got emotions! How much should you have for your Baby Emergency Fund? You should save an amount that is realistic but makes you happy.

One thing that I noticed in my own wife is that when we bumped our savings up to $2,000 instead of $1,000, she was more positive, more happy, and more secure.  I also noticed her motivation for our plan had increased.  She was willing to sacrifice a little more.  As soon as we suffered from a number of automobile expenses, and used up $1,000 of it, it affected us both.  At the time we decided to just stick with $1,000 since that was the minimum according to Dave’s plan.

Was that the right decision?

That depends.  For some people, it might have been enough, but for us, we noticed that the negative emotional impact was bigger than we expected.  Because of that we recently decided to raise it to $2,000.  We believe that $2,000 is our emotional minimum.  What is your emotional minimum? It’s the point in your head and your heart that allows you to become 110% emotionally invested.  It is your “KILL DEBT WITH NO MERCY” zone. What is your EMOTIONAL MINIMUM?

Below I have put together something that will enable you to figure out what your emotional minimum is.  Some might say their emotional minimum is $5,000, but they only make $25,000 a year.  Umm, you have to be realistic!  It’s like wanting the water in your pipes to go from point A to point B, but you have a busted pipe somewhere in the middle. Emotionally you want the water to still make it but you know that it won’t until you fix the leak.  The broken pipe represents your income, and by finding a way to increase that you could fill a void.  Filling that void may cause your emotional minimum to decrease slightly.  All I am saying is be realistic, and don’t give up just because you want to save $5,000 but can only afford to save $1,000.  You have to crawl before you can walk, but do everything you can to learn how to walk! (increase your income)

If your emotional minimum is going to take you more than 3 months to save, then maybe you should consider picking a lower amount.  The purpose of the baby emergency fund is to cover the little emergencies that may come along, while you are killing your debt with extreme intensity.  You don’t want it to take forever, don’t forget that you will fund your fully funded emergency fund in the next step, so keep that in mind.  The below chart is just an example of a possible starting point.  Do it your way and make personal finance bearable!

Baby Emergency Fund:  Option A ($20,000+: income per year)

Level One – $20,000-$40,000 –  $1,000 to complete baby step 1

Level Two – $40,000-$60,000$2,000 to complete baby step 1

Level Three – $60,000-$80,000$3,000 to complete baby step 1

Level Four – $80,000-$100,000$4,000 to complete baby step 1

Level Five – $100,000+ – $5,000 to complete baby step 1

Baby Emergency Fund:  Option B (Less than 20,000: income per year)

Level One – $20,000 or less$500 to complete baby step 1

Level Two – $20,000 or less$1,000 to complete baby step 1

Level Three – $20,000 or less$1,500 to complete baby step 1

Hit The Nitrous Button

If you feel you are running out of steam, hit the nitrous button.  This gives you two choices.  You could decide to look for ways to raise your income, and DO THAT each month in order to finish this step faster, OR you could go on to the next step, which is paying off debt by using the debt snowball method.  If you choose to fund your Baby Emergency Fund at level 3, which is $3,000, but you feel you are running out of steam at $2,000, hit the nitrous button and start paying off your debt.  As long as you have at least $1,000! Starting to pay down your debt could give you just the push you need to gain that extra motivation, and it is better than becoming burnt out and quitting?  On the other hand you could also use your current motivation and step it up a notch.  Hit the nitrous button and become even more gazelle intense.

What If My Spouse And I Have Different Emotional Minimums?

The best answer: The spouse with the highest emotional minimum wins!  WHY?  Remember that you sometimes have to lose a battle in order to win the war.  It’s as important for you and your spouse to be working together, as it is for you to reach your personal emotional minimum.  You would rather be running together, not one being dragged by the other.  Team work will also give you a significant emotional boost as well as do wonders for your relationship.  What’s the problem with letting your spouse win, either way you both still win.

Dave Ramsey’s plan is completely solid, but we all like options. His plan is the foundation and foundations can be made stronger.   Giving yourself options in order to increase your maximum emotional attitude towards doing something will work greater for you.  Give it a try, but remember that sometimes emotions can lead you astray.  Use this method only to help pick the best savings plan, not as a way to justify buying something you really don’t need.  In that case, an instant emotional boost in the store, will likely become a bad emotional drain later on when you start to experience buyers remorse.  Think smart, think BIG, think debt free!

I want to encourage you to not only give this a try, but please tell me how it works for you.  Tell me why it did or didn’t work for you.  What could be better?  Did I leave something out?  Leave me a comment explaining…

About Brad Chaffee

7 Responses to “Baby Emergency Fund – Do It Your Way!”

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  1. keilabee says:

    Thank you so much!!! I have been going back and forth on how much to save since I don’t think $1000 makes me feel emotionally secure; but $2500 in the baby emergency fund makes me feel really good. Thanks for the confirmation. I am re-enrolling in Financial Peace this fall 🙂

    • Brad Chaffee says:

      Good for you Keilabee! I am so happy that you were helped by this article. Personally we felt the same way, which is why we started with $2,000. Of course we didn’t realize that was our emotional minimum until it was gone. With a baby on the way, we feel our risk concerning emergencies will go up. So should our emergency fund! It has been somewhat troubling for me to take a break from the debt snowball to refund our BEF, but only because I want to get it out of the picture once and for all. The last $7,000 has seemed to drag by, but it won’t be long now. we have just under $3,000 until debt freedom, and we will attack that as soon as we have our larger BEF.

      Good luck and congratulations on going back through FPU!

  2. Meg says:

    We keep our EF around $4000 which for us is more than 1 months’ living expenses. Our reasons for this are: we drive older cars (1 already paid for!) and want to have enough to keep them going. Also, a second major reason is that my husband is currently fighting his ex-wife to retain residential custody of his (our) son. Having extra in the EF account just makes me feel less on edge about where the money is coming from to help cover court costs. We’ll probably plan to maintain a “dealing with ex-wife” EF until our son turns 18, just in case. 🙂
    I’ve resolved not to be destroyed by debt whenever it is within my power to do so.
    Like he said, Do it your way! You have to do what will work for your household.

  3. Arturo says:

    Hello Brad:

    I have a circle in which I pay off my credit cards every month but have nothing left to pay in cash for the rest, so I have to go again to the credit cards. What is the approach you consider is good to get into the debt free life beginning from the point I am ??? I would not like to pay any interest, so I am thinking in not doing into the Dave Ramsey’s Baby Step for the moment, so it should be attacking my consumption but it seems there is no much to cut already.

  4. Wes says:

    Since my income is less than $10,000 a year, I’m now looking to save a Baby Emergency Fund of $300. I think that making my goal reasonable puts it in reach.

    I kept looking at Dave Ramsey’s recommended $1,000 and thought “It will take me ALL YEAR to save that much!”. But $300 is something I think I can do in 2-3 months.

    Will $300 cover one months’ expenses? Not quite. But since there is little chance of me actually needing it (I live on SSI, do not own a home, do not use credit cards, and do not drive a car), I feel comfortable that $300 is big enough to be safe yet small enough to attain.

    Thank you for providing options! Now I don’t feel like a failure, just because DR’s “Baby Step” of $1,000 is way too much for me.

  5. Jenny~Z says:

    I know this is an old post but I still would like to comment.. so I’m going to!

    I’m a 23 year old student about to go to teacher’s college and I have my fair share of student loans, credit card debt and a past of even more debt than I currently have.

    My annual income last year (according to the taxman) was about $11,000. (I’m a waitress so it may have been a little bit more.. but definitely still way under $20K). My current emergency fund is at about $2600 and I have $1500 in a separate account for my bills. I also have $1100 saved for a new computer and close to $6000 in retirement savings. It has been a LONG LONG journey to get where I am now. But, the security I have with all of these savings allows me to spend close to 33% of my monthly income paying off my debts, which would not be possible if I didn’t have the emergency fund/bills account. There is SOOOOO much value to emergency funds..

    Stay positive!!

    • Brad Chaffee says:

      Old post or new post the4 conversation never truly ends. Thanks for the great comment! 😀

      Your story is so awesome and inspiring! You have done a great job and utilizing an emergency fund and special savings to self-insure your lifestyle and help you get rid of that pesky debt. Your example is most helpful because most people in your situation would gravitate towards the default justification for not having an emergency fund. It IS possible to save money when your income is limited but the key factor is that your lifestyle has to match your income and that’s what you did so well. It just takes a little longer but like you said, it’s TOTALLY worth it.

      Congratulations to a job well done and thank you so much for sharing this with everyone who pay come across it in the future. 😀

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