I know most personal finance experts say you should have an emergency fund, but I’ve never really worried about it for a few reasons.
First, I’ve always been pretty good with my finances. I’ve saved a lot, so on any given month, if something came up, I could just stop saving and use that money for an emergency. But now that I don’t have a stable paycheck and some months are really tight, that’s not an option anymore.
On top of that, I’m pretty disorganized with my money. I never had separate accounts for different things like vacations or car repairs. All my savings were in one place, and I’d just use them for whatever I needed. This worked for me because I’ve always been sensible about spending.
Lastly, I hate seeing my money just sit there earning a measly 1% interest! I always feel like I’m losing potential income by not investing it somewhere that offers a better return. Whenever I have more than $5,000 in my bank account, I start thinking about where to put it to get the most bang for my buck.
I’ve been fortunate so far and haven’t faced an emergency I couldn’t handle. If something big did happen, I could borrow from my mom and pay her back once my certificate of deposit matures or with rental income. I could also use my credit card and deal with the interest for a couple of months. Sure, using a credit card at 19.9% interest isn’t ideal, especially when I could use that money to invest at 8% or pay down a 7% loan like I did recently. For example, in July I got $5,000 from various sources and used it to pay off part of my 7% loan, saving me 10 months of payments and around $500 in interest. So, if I have an emergency this month and end up paying $20 in credit card interest, I still see it as a win. It’s definitely risky, and not for everyone.
I know this approach isn’t perfect, but it’s worked for me, mainly because I’ve been lucky with minimal emergencies. I don’t own a car, don’t have kids, my apartment is only three years old, and I’m healthy. Plus, knowing my mom has a big emergency fund as a backup helps. I’d never ask her for money unless it was a real emergency, but it gives me peace of mind. So, I feel now is the time to take more risks with my money.
Can you handle not having an emergency fund, or do you prefer the safety and peace of mind, even if it means missing out on potential returns?