Emergency Funds, Unexpected Expenses & Fees\Interests

Hi all : )

My name is Oron and I started using YNAB ~a week ago

The reason for using the app is that I relocated from Israel, hence I have troubles knowing what is the reasonable price for each object (you can say category as well), so I want to track it and learn average cost

I'm noticing the budget is changing all the time, but I guess this is expected since I have a bunch of stuff to buy in a very short time, in addition to constant monthly expenses

I'm opening this thread because I'm not sure how to handle 3 things described in the title

I've created an emergency fund sub-category, and I set a goal for it for the next 2 years..I read\heard that I should have 6-9 monthly wage in it, and I must say the goal is really tough\impossible to achieve in 2 years LOL

The thing is that I actually have this money in my Israeli account, which I don't think I should add into YNAB (wire transfers, foreign currency, starting "new life")

Do you think I can skip the emergency fund process, and start using the money for other stuff?

Next is unexpected expenses..not sure how much should I put aside

Not talking about a car (which I don’t have) repairs like I see most people do (if you know you’ll probably fix the car, just don’t know when, this is still expected I think LOL)

I really mean unexpected expenses - Can't define cause I don't know what will come

Finally, is the interest & fees - Should I budget it only when I do have interest & fees to pay?

If I don’t think I’ll have such things (I currently don't and I don't plan to have any), should it be part of the unexpected sub-category?

Happy to hear your opinion!

 

Thanks : )

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  • Hello Oron,

    It's easy to see you are new to YNAB.  

    An emergency fund is important, for many reasons, including the ones you listed.  An emergency is an unexpected expense, or fees, or anything else that can come up or that you forgot to budget for.  As far as how quickly to fund it, that's up to you.  The more you have in your emergency fund, the less you will stress when "things happen."  

    Funding your emergency fund with 6-9 months worth of wages in it in two years is a great goal.  I'm 5 years in and only have half a month's income in my "emergency fund" so far.  Defining your emergency fund is a personal definition.  Some people consider a month funded if they can meet basic necessities, other people define it differently.  I define it as a month's income.  It all depends on your priorities.  

    My "emergency fund" only includes half a months worth of income, and I have many other well funded categories, like vehicle repairs, replacement vehicle, computer and phone.  I also have money put aside for annual expenses and true expenses.  I have a problem with a generic "emergency fund" and do much better when I put a name on what I'm saving for.   It's still a work in progress.  

    Basically, the most important thing, I think, is to have savings.  It doesn't truly matter what you call them so long as you have money you can access.  The more money I have put aside, the less I have to stress when the unexpected happens, and it will happen.

    A generic "emergency fund" is a great place to start.  I started with $5 per month and bet you can come up with that much, and maybe more.  You will thank yourself for it in the future. 

    Reply Like 1
  • I have a couple ideas you might find helpful:

    -You might try setting aside a small amount for some of the really random expenses (like fines) or little things you forgot about in your initial budget in a "Just in Case" sub-category that you can either spend from directly if it really won't come up again or move money to the correct category if you need to create one. I'm not sure what country you are in, but here in the US I found that having $100 in there to start out with was more than enough. Now that I have a better idea about those types of items I don't find it as necessary.

    -Do you plan on using any of the funds in the Israeli accounts for your current expenses (or do you still have expenses in Israel you cover from that)? If so, you should probably have a separate budget for those funds. If not....How accessible are your funds in the Israeli account? Could you access it in a day, a week, longer? Could you cover any emergency expenses until you could transfer the money? In that case, that might be your emergency fund, at least until you save up more money in your current currency.

    -The "Unexpected" items that would need a generic savings fund are of the "The sky is falling!!!" variety and are often funded by an Emergency Fund (at 6-9 months income--which could be less if you have other well defined savings buckets and the total of your savings is 6-9 months income).  What feels like a "The sky is falling" amount to you right now? Is it 1 paycheck, 1 month income, an insurance deductible or two? I would pick an attainable number (while funding more well-defined emergency goals like medical, travel home, and replacing items you can't live without) and then see how you feel once you get there.

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  • Thanks all : )

    So I read 2 different approaches in here

    1 is "emergency fund" = almost whatever (including fees, fines, interests etc)

    2 is "emergency fund" = sky is falling (lost my job I need to live kind of thing LOL or really bad disease)

    I tried to find some best practices, and I thought that the "unexpected expenses" are more like the small little things as  adriana01 said and the "emergency fund" is mainly for major events

    adriana01 -  I'm currently living in San Diego..not sure I understood what you said regarding the "just in case" - Did you mean budgeting it 100$/m?

    Regarding my other Israeli account..I didn't plan to use it for current expenses..I transferred money in the beginning so I could have something to start with....It does have the 6-9 months worth of wages, but I eventually want to use it to invest in real estate

    The money there is just waiting to be used (shouldn't be used in Israel) and available to me ~2-5 business days (usually 3) the moment I make a wire transfer

    Thought maybe I can say that the Israeli account will be the emergency fund, and I'll use my salary to invest in stuff right now (after I'll put some money aside, but a lot less than 6-9 month worth of wages), because I can't buy any house at the moment since I have no credit, just got credit card etc..it will take me time only to be approved for such a thing

    Reply Like
      • adriana01
      • adriana01
      • 6 mths ago
      • Reported - view

      Oron Subayi For the "Just in Case" fund, I funded it at $100, and then only added funds as they got used. When I was getting started, I knew that if I had forgotten an annual subscription it would be under that amount, and any parking tickets would be less as well. If I were just starting out now, I would probably fund it with $300 because getting towed because I missed a snow removal day is more expensive where I live now, and that is the most likely reason I would need it. Any recurring expense I discovered (like if getting tickets or being towed became a regular thing) would become a new category rather than continuing to be funded from this category. I added an ATM fees category after a few months of pulling from this category.

      The differences in the approach to the emergency fund are based on where you are at financially. For people who are starting out with credit card debt or not a lot of savings, anything that disrupts their cash flow can be an emergency so starting with a smaller generic fund while growing the targeted savings is more useful. When you don't have debt and have well-defined savings categories for most of life's major events, the generic fund is more of a peace of mind issue. Some people like to have it, others don't. Once you have things like insurance deductibles, medical expenses, and electronics replacement saved for, the biggest emergency is probably loss of income.

      Now that I have several well-defined, well-funded long-term savings categories, I've found that pretty much anything else that pops up can be dealt with by reassigning funds from the savings I already have (my car replacement fund has been raided a couple times because I wasn't funding auto maintenance highly enough, for example), even though that goal will take longer. Then I add a new category or readjust my budget for existing goals going forward.

      Reply Like
    • Pikayo It is a really hard question : )

      I have no idea when I will be in a state when I can say "now I can buy a house"

      I need to build good credit, I heard I need to have at least 2 credit cards that are 2+ years old, and it depends on the house's price as well

      But my best guess is that there will be leftovers in my other account....I plan to invest, therefore I'm not thinking about buying expensive stuff, but use the leverage you get from a mortgage and invest the smallest portion I can

      In addition, I do have some other resources like company's stocks if  needed, but again I don't know how much I'll have when the time comes, and how much money they will be worth

      Reply Like
      • Pikayo
      • Pikayo
      • 6 mths ago
      • Reported - view

      Oron Subayi  I would just say that at the point when you buy a house, Emergency Fund also means "sudden major roof repairs", "unexpected new heating/cooling system", "mortgage payments if something happens to my income", etc.  So I would want a definite Emergency Fund at that point.

      If it was me, then personally I would want to first save for/have

      • Emergency Fund
      • House deposit and house buying expenses (eg survey/inspection fees, legal fees)
      • True Expenses (the things that I expect to pay at some time, like software subscriptions, insurance, maybe taxes, car maintenance, tech replacement etc)
      • Some regular retirement saving

      Apart from the retirement savings I would keep all these in available funds which are not at risk of fluctuations in the stock market.  After that, I would start investing in stocks. 

      But perhaps you're planning investments over the two years when you're preparing to buy a house, then to cash them in to use?   For me that might feel too risky but then I'm quite risk averse.  Everyone's different.

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