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Be Prepared! Why You Should Have An Emergency Fund.

Earlier this year, I didn’t really have a well-financed emergency fund.  And then an emergency happened.  A really big one, and it kind of upended life as we knew it.

Do you know the one I’m talking about? You get one guess.  Rhymes with Shomvid-19.

It’s common thinking in the finance community that everyone should keep an emergency fund of cash that measures anywhere between 3 – 6 months worth of expenses.  This is a buffer for yourself, that should something bad happen, that effects your life and your cash flow, you have funds to fall back on and can avoid the need to take on credit card debt or personal loans to meet ordinary & everyday expenses. 

(Do you know how much ONE month’s worth of expenses is?  See: Let’s Start At The Very Beginning and start tracking).

I have an admission to make- I was totally a naysayer.  I had all kinds of excuses for myself. 

“I’m a business owner, I have job security!”

“Well the only REAL emergency I can envision is health, and I’m funding an HSA for my retirement I can dip into if needed, but I’m healthy anyway!” (HSA: we’ll get there).

“I’m keeping a small amount of cash on hand, but paying my bills and making investments- it’s all very sensible!”

And then an emergency happened.

The whole notion of an “emergency fund” exists inside that word, “emergency”, the dictionary definition for which is “a serious, unexpected, often dangerous situation.”

The Coronavirus pandemic was unexpected.  And it’s certainly serious, and dangerous.  But beyond what risk it may cause to our health, and the health of our loved ones- it is a global event that came upon us quickly and has completely changed our way of life as we knew it.  It was and still is a true worldwide emergency.  While the pandemic is having widespread macro effects on our everyday lives (anyone remember what it was like to sit in a movie theater?), it’s also most certainly having a profound micro effect on our personal lives also.

So here I was on March 15th, facing one of the biggest actual emergencies in the span of my lifetime, and now this emergency was made that much harder by not having kept a reliable safety net for myself!

So, what did I do?  I took action to create that foundation as swiftly as possible.

Like so many others in the entertainment industry, my business simply cannot operate without the ability to present live theatrical entertainment.  As my partners and I discussed what was reasonable and possible amidst the ongoing developments of March, April, and eventually May, and how we could protect our business for the long haul, it became immediately clear that we simply could not drain our coffers every month and expect to have a business to come back to.

And that’s the funny thing about being a business owner, yes you make all the rules, the decisions, you report to yourself- but at the end of the day, you have to keep the thing alive.

When it became clear my regular salary was going to take a humungous hit, I was hopeful like many others that the safety net of unemployment benefits would catch me.  And it did…………….eventually.

Anybody who went through that process in March/April (or still ongoing to this day!) knows it was an absolute NIGHTMARE.  Literally hundreds of calls to the unemployment office weekly, sometimes daily!  Yes, we knew the money would/should/could come to us ASAP when everything was approved- but in my own case, I didn’t receive any of those funds until 8 weeks after I first filed for those benefits!

And I’ll be the first to admit, those weeks were not easy ones.  The questions started to race faster and faster in my mind- how will I pay these bills?  How will I pay my rent?  This money is supposed to come soon, but WHEN?  WHERE IS IT BABY YODA?!  WHERE?!?

Oh, Hello!

If I could apologize to April 1st Joe for one major misstep on my former self’s part- I’d say, “Joe, I’m so sorry I did that to you.  That I put you in a position of worry and compromise.  I promise to keep an emergency fund going forward.”

You see, once those benefits did start to kick in, and I could focus on building my financial foundation again, a very funny thing happened.  The stress miraculously started to lift.  I started stashing away money furiously, but methodically.  And eventually, I could look at my accounts with amazing peace of mind, because even though I had no idea what could happen next week, or month, or the month after that- I knew I had enough money in my emergency fund to last at least 3 months, so things were going to be OK.

An emergency fund is so much more than just numbers on a computer screen.  In drama class, we used to do “trust exercises”, where you would fall backwards flat, with your arms crossed in front of your body, and your class of peers would catch you.  Your emergency fund is that group of peers, it will catch you every time you stumble.  And in knowing you will be caught, the fall can still be frightening, but there is calmness in knowing things will be ok.  

Fast forward to July 8th.  I’ve maintained that fund, and even managed to grow it further, and now have about five months’ worth of savings sitting in various high interest online accounts (we’re going talk all about that next week, buckle in for Post #4, it’s a hot one), where my money is working hard growing for me, every single day.

I can’t encourage enough that you take a deep look at your monthly expenses, and then think about that emergency fund.  Maybe you start small- enough to last one month, then two, then three… Do yourself the favor of gifting that peace of mind that comes from knowing no matter what happens in life, you’ve got your own back.  Before we can talk about anything else personal finance related here, I urge you to take that step with me.

And then it’s there if we need it, should another emergency come our way.  The world is a mess and there is so much uncertainty.  Let’s hope we don’t need those funds anytime soon, but gosh it feels good to be prepared.


  • Lori
    July 10, 2020

    This was oddly therapeutic to read – especially the image of the “trust exercise” from acting class. I have an emergency fund, but in the midst of all of this craziness, I often forget that it’s actually there 😂.

    Great post. Thanks, Broadway Joe!

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