Emergency Fund in Tracking?
I have a savings account that I use for my emergency savings and have it set up as a tracking account. When I make a deposit from my chequing account I do it as an outgoing expense to my "emergency fund" category.
Is this wrong? Should I have it as a budgeting account and just keep growing my available amount?
If I have an emergency expense I currently transfer money to my chequing, so it shows as "to be budgeted" then I move that money to the category that best suits the emergency (e.g. auto maintenance when I was in a fender bender). My reasoning is that this way I can also see where my "emergencies" are costing me and see if I need to budget more in some categories - likely for my car and pets.
In a podcast a bit ago Jesse talked about how, after a while, his family have stopped having ‘emergencies’ since when they have one he would start a new true expense category. I can’t remember what examples he gave, but it made sense. Although you would end up with a LOT of money on standby… more than I am disciplined enough to accrue.
Just starting this journey, and I've read through this thread. Lots of good information here, but still a few unanswered questions for me. The big question is down a bit further if you want to go straight there:
Just so I can clarify, the three methods we're talking about is:
- Link your emergency fund and track it, because it's in a separate bank account already...
- ...or, make it an unlinked account that you need to periodically reconcile.
- Consolidate your funds into a single account and just earmark the emergency funds by putting them in their own budget category that rolls over every month.
Is that correct?
For option 1, what happens if the fund isn't fully funded to your satisfaction, and you make a transfer from your primary checking to your emergency funds savings account? Two transactions will show up, right? Where would you drop them in your budget?
For option 2, seems there's too much manual updating. And, if you transfer money from your checking account to your unlinked emergency fund, how do you reflect that decrease in the budget?
For option 3, although your money will be "co-mingled" into one bank account, it seems you would be able to easily assign it to an emergency fund category and when you actually have an emergency, you'll be able to move money from that budget category to the category the emergency actually affects.
THE BIG QUESTION:
What if you pull money out of your house for a single purpose. Remodeling. And, you want a payment card dedicated to that account so you can accurately delineate between transactions recorded at Home Depot, Amazon, etc., without having to sift through personal transactions. Would you link that account and then create a budget amount and only assign funds in that account to that budget item? If that's the case, when you spend $1000 on lumber, how do you track that it's lumber in YNAB, or HVAC, or Plumbing...?