Money To Live

April 22, 2009

Tapping my emergency fund

Filed under: Uncategorized — by moneytolive @ 5:00 am

A popular (and controversial) topic in personal finance is the “emergency fund.” The standard advice for an emergency fund is to have 3-12 months living expenses in cash.

When I was laid off I had a little over $12,000 in cash savings. Half of this was intended as an “emergency fund,” and half of this was the beginnings of a “down payment fund.” Since home ownership is off the horizon for now, I lumped all of the money together and will leave it that way until I feel financially settled again. In Virginia, my minimum monthly expenses were around $2,000. Not counting unemployment and severance, I could survive for about 6 months.

An unexpected expense

I was pretty shocked when I realized I had never considered one aspect of my emergency fund: would I have enough money to move?

Soon after being laid off, I realized I did not want to stay in Virginia, and it would be quite expensive to leave.

The cost of moving would be more than $7,000, deeply cutting into my cash savings. To move out of my apartment, I would owe 4 months rent: 60 days notice of intent to vacate and 2 months penalty. With monthly rent at $1,610, it would cost over $6,000 simply to leave my apartment. Also, to move even some of my belongings halfway across the country would cost a minimum of $1,000.

I had not thought about moving costs, and a lot of other people are in this situation as well. Consider Detroit. Not only are people losing their auto industry jobs, but since the industry is dying and people are leaving, home prices are plummeting. To leave, a family needs enough money to pay for moving expenses and make a down payment on a new home (or deposit on an apartment). They may be unable to sell their Detroit home for a profit and may have to keep making mortgage payments on an empty house, rent out the house (possibly at a loss), or face foreclosure.

Fortunately, I was able to negotiate what I had to pay to break the lease. Instead of $6K, I ended up having to pay only about a third of that.

Dipping into savings

With the help of severance pay and unemployment benefits, I have not had to tap my cash savings yet. I hope to keep it that way, except for two, big upcoming expenses:

  • attend a residential yoga teacher training program (about $5,500)
  • pay the deposit of my next apartment

Since I do not have a job lined up, I am taking three weeks off from the job search to obtain a yoga teaching certification. Today my mom and I started a road trip to the Colorado Rockies, where I will be for the next three weeks.

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2 Comments »

  1. Good luck and have fun on the road trip!!

    Comment by Shannon — April 22, 2009 @ 10:36 am |Reply

  2. I haven’t moved most of my possessions, only myself. I have things that I need to pick up at some point, and then the cost of moving far is going to hit me. I really don’t know how that is going to work, but for now some friends are housing my things in their basement.

    I agree that deposits are a scary expense when not yet employed. I am currently on a month-to-month basis for rent/commitment. I was lucky to take over a room from someone I know and they have left their deposit for me to return later.

    The teacher training program, whilst expensive, is in my opinion a very worthwhile investment in *you*. I have spent a lot of money on personal education, which I often grumble about but I know that it well and truly pays off in my personal life (and hopefully soon in income too).

    Comment by Anita — April 25, 2009 @ 7:07 am |Reply


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