How Much Do I Need in My Emergency Fund?

Our emergency fund is finally fully funded. WHEW! Since I am switching to full-time self-employment,  we have been really focused on building it back up. A couple of months ago, I drained our emergency fund completely so that we could pay the ol’ student loans.

Currently, we have around 12 months of expenses in our emergency fund. If we didn’t have some sort of emergency fund, I honestly don’t think that I would feel as comfortable about self-employment.

I am confident in my services that I offer, but you never know. What if I have a completely uneventful month where my expenses are higher than my income? What if something in the house breaks or our basement floods?

Luckily, we also have a fairly low budget. This makes saving up for 12 months of expenses a little bit easier. However, I will of course not say that saving up for a fully funded emergency fund is the easiest thing on earth. It is definitely hard. Saving up for an EF is a lot more enjoyable than paying off student loans though 🙂

Holly is another fellow freelancer, who recently made a post about why she’s happy that she has an EF. They are important!


Why is an emergency fund important?

An emergency fund is important for many reasons. For the sake of this post, an emergency fund covers all “emergencies,” even though I do understand that some families have a “job fund,” “house fund” and so on all in different categories.

An emergency fund makes living life a little bit more comfortable. If you don’t have to worry about living paycheck to paycheck, or about how to pay for the next thing that breaks, it’s probably because you have an emergency fund. Of course, you don’t want things to break, but if something unexpected does happen, then it does not have to be the end of the world.

An emergency fund can cover all types of events. Maybe a medical problem arises and you need to pay for some of it out-of-pocket.

Did you lose your job? An emergency fund can help keep you afloat until you find your next job.

An emergency fund can also cover something going wrong or breaking in your house. What if you need a new roof? Or a new furnace? Or your basement floods? These things are not cheap.


How do I determine how much I need?

It is a little difficult to determine how much each person/family should have in their emergency fund. I would say that it should be whatever you are realistically comfortable with.

Some people feel perfectly fine about not having a large emergency fund and consider their credit cards their emergency fund, whereas others really think that a large emergency fund is important. I am one of those people who think that a large emergency fund is best. I am a big worrier that something will break!

If you have debt, some say that you shouldn’t carry more than $1,000 in your emergency fund. This is because you should be focused on debt instead of emergency funds which don’t gain much in interest.

Since I plan on switching to self-employment, I want a larger emergency fund. I don’t want one bad month to make paying my monthly bills feel impossible. Having 12 months of expenses feels like a comfortable amount to me. My EF could potentially cover 12 full months of $0 earnings, or it could cover a mixture of lower income and something happening to our home.

Generally, if you own a home, have an unstable job (such as a commission-based job), have an older car that might need repairs soon, or a larger family, then you will want a larger emergency fund. With a home, things break. With an unstable job, you might have a bad month, and an EF can give you peace of mind. An older car might need a repair, and if you have a larger family, well, there is a bigger chance that something unexpected may happen.

Do you have an emergency fund? Why or why not?


Tips For Successful Freelancing Part 1

Nearly every single week, I receive a couple of emails from readers asking for any tips that I have so that they can get started with freelancing as well.

Today’s post will be all about freelancing successfully, enjoy!

When I tell people that I am switching to 100% freelancing, they tend to think that my life will be easy as cake and that I will basically be prancing around in my pajamas 24 hours a day.

They also think that I will be sleeping for around 15 hours each day.

I’m not sure why people think this. Freelancing is still working and everyone still needs to plan in order to be successful.

Below are my tips in order to freelance successfully:

Be realistic.

One thing that I always tell everyone is that you need to be realistic with your freelancing plans. Not everyone makes 6 figures, and not everyone is successful.

What works for one person may not work for you. Not everyone has the same skills, and not everyone enjoys doing the same thing. I think that if you want to work for yourself, then having some sort of passion is a good idea. Enjoy what you are doing!

Have a plan.

If you are going to switch to freelancing, make a plan for what you want to do. Can you afford it? How many projects can you realistically take on? Will you hire employees? What kind of business budget will you have? What will you do as a freelancer? What will your pricing be?

There are many questions to ask yourself. Not everyone has everything answered, but it is wise to have some sort of plan so that you are prepared for things that may happen.

Market yourself.

If you just started freelancing, then it would be very hard for anyone to know about your services unless you market yourself. How is anyone supposed to know what you do, if they don’t even know that you exist?

There are many ways to market yourself. You can start a website (as discussed below), ask for others to recommend you, be active on social media, advertise online or in the paper, and so on.

Create a website detailing your services.

This goes hand in hand with marketing yourself. When most people are researching what company they want to use for a project that they need done, then the first thing that they do most likely will be searching online for the company’s website.

If you don’t have a website, then this might hinder your growth. Just start one! It can be simple, depending on what type of service that you offer. Of course, if you have some sort of design business, then having a nice website will be key.

Ask for a review or a testimonial.

If you already have some projects completed for your clients, trying asking them if they will leave a review about how you did. If you have REAL reviews from REAL customers/clients, this will help potential future customers choose your services.

Have a schedule and stick to it.

When I make the freelancing switch, it does not mean that I will be sleeping in until 1 p.m. every single day. I will still attempt to stick to a similar schedule as to what I have now.

In some industries, your clients may only need you after 5 p.m., maybe only before 7 a.m. If you plan on entering these industries, then you will have to adjust your schedule and work when they need you.

What other tips do you have for successful freelancing?


This post was mentioned on Money Bulldog.


What I’m Doing to Prepare for Self-Employment

What I'm Doing to Prepare for Self-EmploymentA couple of months ago, I published a post on Making Sense of Cents about How To Prepare for Self-Employment. I am planning on making the switch relatively soon, and I wanted to publish an update to that post.

There are many things that I have done and that I need to do in order to make the switch to self-employment as smooth as possible:

Increase our savings

We are really working on increasing our emergency fund. We depleted a lot of it in order to pay off my student loans. We want to have around one full year of expenses before I make the freelancing switch.

Luckily our budget is kind of low. Everything altogether (but before saving for retirement) is around $3,000 each month.

Think of a backup plan

Self-employment and freelancing is a dream of mine, and I would really prefer it to never end. However, we have to be realistic. What if something medical came up? What if freelancing really went down hill and we use up all of our emergency fund?

I really want to keep my resume up-to-date as much as I can. I want to keep my skills up-to-date as well. I really do have high hopes for my freelancing, and I am hoping that I will be successful with it for years to come.

Build my freelance services

Yes, I said empire, mainly just to be funny!  I am working on increasing the number of services that I offer, and I am also working on increasing the amount of clients that I have. Yes, I will be tired up until the day that I make the switch, but it will all be worth it.

I have been much better with streamlining my tasks and making everything work. Working my day job and freelancing have been much better lately.

Health insurance

Health insurance is tricky. Until W and I get married, I’m just going to have to suck it up and pay the high cost for health insurance. I am still undecided if I should pay for a cheaper plan that is mainly for “catastrophic” medical cases, or if I should get a more expensive plan.

I am healthy and hardly ever go to the doctor, but you never know what may happen.

Various expenses

There are a lot of relatively little things that I need to plan as well. I would like to set up a home office so that I am not just working anywhere and everywhere in the house. I would like to be more organized and have a place that I can really concentrate.

Right now, my various offices are on the couch in front of a TV…


Taxes have of course been thought about and have been paid so far. I’m still looking into various ways to be smart with taxes and I will be consulting with more accountants soon. Paying 30% to 40% in taxes makes me cringe, but it has to be done.

It will be harder to get approved for financing

This is something that everyone keeps telling us. Yes, I know! We are putting our home-buying on hold since we haven’t found anything that we like yet.

What else should someone do who is preparing for self-employment?