It’s been a while since I reported how we’re all progressing financially at Thrifty Towers. Part of the reason for this is although I am blogging very publicly about my bid to earn my financial planning halo, I still feel the actual figures involved are my business and my business alone. Plus, the figures themselves must be pretty boring and meaningless to an outsider.
I mean detailing a weekly shopping budget for a family of five with three enormous teens will bear no resemblance to that of a single parent feeding a toddler. Our mortgage will seem huge to a couple, and tiny to a Londoner. My shock at the price of car insurance for my newly driving son will only resonate with parents in that position themselves, in which case they don’t need me to tell them how ridiculously expensive it is.
However I am happy to report that in addition to now being overdraft and credit card debt free, (yippee..little pat on the back) we are now well on the way to achieving stage three of our plan. That is to have a healthy “shit-happens” fund.
We have prioritised getting this over tackling the next debt because the interest rate is quite low and therefore a few months more of just paying the minimum will not make a huge difference to the final amount payable.
But as with many families, it is those little emergencies that eat into an otherwise well planned budget. You know, those events that happen quickly, where you have no time to find the best deal and no choice but to hand over the money. The car needs fixed. A molar breaks (ow – yes that happened this month). A family member becomes ill and all that extra petrol and parking to visit them adds up. Visiting them means you can’t work; as a freelancer, you lose pay. All these expenses are necessary and justified and ridiculously hard to plan for. Typically, having analysed our spending history it has become apparent to me that it is failing to plan for these costs that sends us into overdraft over the course of each year. Like many families, we would be just fine and dandy if we could only guarantee that the washing machine won’t break, or that the dog will stay away from deadly chocolate contraband – or cars! But life happens. It just does. There is no point in wishing and hoping and keeping fingers crossed and then cursing our bad luck when the poo happens.
So this year, we have settled on an amount that we think is reasonable and are putting this aside for ’emergencies’. If we never have another emergency, then it will sit there forever. But life being life, and as we and our parents get older, it is highly likely it will be dipped into regularly. The plan is to replace any amount taken as quickly as possible so that it is always there as an emergency float.
The amount we have decided on is twice my monthly income. As a freelancer, my income is pretty variable anyway, so this emergency fund will also cover us if for some reason I cannot work (no sick or holiday pay for me!) or a client is late in paying me.
Of course now I have made plans for the unexpected, the law of Sod will mean that life will proceed beautifully smoothly from here on in.
The Thrifty Ninja. Xxx