Jill Foster

New shoes, new iMac, & old cash worries:
It’s fun spending cash reserved for emergencies.

Even more than fun - it’s bloody easy!

It’s easy to break discipline & access those dollars meant to protect from rainy days. But since that approach has made my family more vulnerable financially, it’s time to rethink. The short-term benefits of a change are clear.

Emergency cash reserves & chess: create the pawns

After 7.5 years of marriage, these prove true:

• if we have only one stash of cash, we’ll spend it. It matters not if it’s reserved for emergencies. We’ll spend it on non-urgent desires. Do these desires help us be more effective sometimes? You bet. But occasionally our compulsion runs rampant.
• it’s time to view emergency reserves like a chess queen and find ways to protect her.
• thus it’s time to create the ‘chess pawns’ in our personal finance life.

The Pawns are the soul of the game. -Francois Philidor

For the past few months, I’ve tested a new strategy. And it’s producing positive results for Sean and me. The goals are two-fold: truly learn to reserve emergency funds for unforeseen, urgent cases; and next, create a system to enable that habit.

Here’s what we did:

• set-up (10) online sub-savings accounts via ING Direct, in addition to our main emergency cash reserves account. These are metaphorically ‘chess pawns’ protecting the emergency cash ‘queen’. In the past, we dipped into cash reserves for these reasons; so we decided to designate sub-accounts to ideally prevent future dipping.
• each month, monies direct to these sub-accounts i.e. medical/dental; clothes/dry cleaning; annual visit to parents; pet care; computer/tech; family gifts; books/education; condo; Alaskan trip for parents by 2012; relocation expenses.
• each pay cycle, 12% auto-deposits into emergency cash savings with app. 3% funneling to the sub-account buckets. And so far for one business quarter, the emergency bucket has stabilized and steadily increased since we use those other sub-accounts for spending choices. Hooray!
• Note: at least so far, we don’t necessarily spend monies each month that were allocated to those sub-accounts. Yet if for example my husband needs Ruby on Rails books for his coding library, he has accessible, dedicated funds for that decision.

Pawns, marriage partners, & the psycho-summary:
It’s just another way to budget. But the tangible existence of these ‘pawn’ sub-accounts has helped us stay on track with building emergency cash. And it’s helped to clarify spending priorities.

It’s working too from a psychological perspective aka it’s less stressful in the guilt department. In the past, I’d mentally beat up on my husband and me for dipping into emergency reserves for play or even basic needs like new shoes (…to replace that broken heel). Footnote: guilt drains marital trust and fun for sure!

More from:

• Housewifery & another whacky point along our rainy-day cash quest;
• The Simple Dollar’s tact to emergency reserves;
• Emergency Preparedness Tips & your cash (use the freezer?);
• MSN & the ever frank Liz Pulliam Weston on learning financial flexibility for tough times;
• Millionaire Mommy Next Door & her fantastic approach toward tailoring a budget & recognizing spending values.