2017 was a big year for many Puerto Ricans in the island and in Mainland USA, and we can sum it up in one name: Maria.

When Maria came and went, our island changed in so many ways: the recession was exasperated where in other circumstances, it was hardly seen. Many people lost their homes, their loved ones and their overall routine. For around a month, Puerto Rico ran on one radio station, WAPA Radio, and the word “hustle” was a perfect description to finding essentials like food, gas, and ice. We were hurt in so many ways, most of them economically, since many didn’t have a job after the hurricane, or couldn’t return to their routine due to the destruction of their workplace. There was a lot of need, but we thrived and survived.

Before the storm, I remember withdrawing around $200 to keep in cash, in case it was needed. Little did I know, it was a godsend for my family at the time. From chipping in for gas for generators, to gas for the cars and even emergency food shopping, we had that mini cushion there. Never thought of it as an emergency fund at the moment, and didn’t know what it even was. I lived paycheck to paycheck like everyone else, undermining that it has detrimental consequences.

Let’s fast-forward to January 2019, in which my aunt died in New York. It was a trip that wasn’t planned, so it went straight to my credit card, in the hopes that in some moment, I could pay it off. I saw family members which I promised in the past that I would visit, but daily routines and the constant “I don’t have the money” limited this for too long. My dream was to go to NYC and see the city, from Broadway, to the baseball parks, but routine crushed it harshly. I decided to save a decent amount each month, with the purpose to travel within 2 years with my family.

And later that year, I started to get into Dave Ramsey and his path towards wealth through his Baby Steps. It was a moment where, Puerto Rican media was bombarding teacher retirement, which basically since the island is deeply in debt, its possible when it is time for me to retire, I would receive maybe 30-40% of what I put in. And I have been in the government system for 14 years. I hit a hard reality. I need to save for my retirement, or I will be a burden to my children. I was sick of my retirement money being monkeyed around in the name of PROMESA. My money should be there by the time I decide to retire. And this was the moment that I decided to begin my emergency fund.

So what is an Emergency Fund?

An Emergency Fund is an amount of money that is saved for any sudden event that wasn’t otherwise planned for. An emergency in a household may be:

1. An unplanned medical expense (like an ER visit)
2. Car (main source of transport) breaks down
3. Unexpected house repair (like a broken door, window, or bathroom leak)
4. Income loss (layoff or getting fired)
5. Safety net for a natural disaster (example hurricane like Maria)
6. Emergency travel due to a family loss
7. Any other unexpected expense that you can’t otherwise budget

What is not an Emergency?

Anything that you can budget with time should not be an excuse to deplete your emergency fund (guilty as charged when it comes to school supplies). Gifts for family, make-up and beauty salons, massages and/or routine doctor visits should be in your monthly budget, or made to a fund so you can use accordingly.

How much money should I have in my emergency fund?

According to Dave Ramsey, your emergency fund should be able to cover expenses for a period of three to six months in household expenses. Household expenses include utilities, rent or mortgage, groceries, gas for vehicles, and medical coverages. The overall preference of the amount in your emergency fund depends on your job security and how which amount are you comfortable with.

Dave Ramsey suggests to start an emergency fund, save at least $1,000. It isn’t much money to start with, but will cover any unexpected expense you would otherwise use your credit card. He suggests that after this money is saved, to start tackling debt. By tacking all debt except the mortgage, you are eliminating every source of payment that goes to companies, so once those payments are gone, you can continue to fund your emergency fund to three to six months of expenses.

Are you going to keep your emergency fund in your bank?

Although this option may be the most convenient for me, I would rather put it in another financial institution, which I can have easy access to, but not to accessible to be able to spend the money. Even though I am not an avid spender, when I have access to money, I can easy allocate it where I need it, and then spend it without even noticing. For me, it’s about retraining myself towards having that savings to expect the unexpected.

So, what are your thoughts? Do you have an emergency fund, or are planning to start one? Try making this slight change for yourself during this coming year.

Have a wonderful day!