Money Pools and the $1,000 Emergency fund

I am a Dave Ramsey fan, I try to listen to his show when ever I can. One of the most common messages he teaches is to have an emergency fund of $1,000 at first and then grow it to 3-6 months worth of your household expenses.

Sarah and I currently have our $1,000 emergency fund in place, set up in a bank account separate from the ones we use for our day to day purchasing. We have found that the $1,000 fund has helped us feel more secure and has given us the ability to pay some of our bills while we wait for some of my outstanding invoices to be paid. The thing is, Sarah and I have another account as our savings account which gets added to sometimes slowly and other times quickly depending on our goals, but the thing is that this money is off limits to us. We don't touch it. What was happening though was that even though we have a good amount saved up we still felt strapped at times when our cash flow was slow because we have decided that the money in savings is OUR money and the power or gas company can't have it because we have given that money to ourselves. But sometimes we felt the pressure to dip into that savings account to pay some of our bills. Ever since setting aside the $1,000 in our emergency fund it has protected our savings account even more from ourselves and allowed us to feel more prepared to handle our fluctuating income.

I highly recommend the concept of having an emergency fund in addition to the account you are using for your savings account. I know my strategy is a little different than what Dave Ramsey teaches but it works for us.

Another thing that Sarah and I do is have little pools of money that are earmarked for certain things. For example, last year when we sold one trailer and bought another we saved most of the money we made over the cost of the cheaper new trailer, but before we put all of the money in the untouchable savings account we took a few hundred dollars and set it aside with a note on it that says "trailer money." This way when we have extra time to make repairs or improvements to the camp trailer we will have extra money to do those repairs. It seems to me that life rarely provides extra time and extra money in the same moment. So since our lifestyle doesn't allow us to store up extra time we store up a little extra money so when extra time comes along we can jump on the opportunity with our extra money in hand.

We have used the pool of money concept for things like vacation/play money, parts money for the off-road toys, and have even had a fund at times simply to be used on anything that is a good deal. Since you never know when a good deal is going to show it's face its a good idea to have some money set aside to be able to pounce on that deal before some one else does, and not have to feel bad because you had to use your grocery money to catch that great deal.