Apparently, she has built up a $1,000 emergency fund three times. Each time, something came up that meant borrowing from the fund. As soon as that happened, she’d rationalize unnecessary spending as “Oh well, it’s already broken anyway.”
She’s tried making it harder for herself, putting the money in a different bank, in an account she doesn’t have a debit card for. But it didn’t change her pattern.
So, per her request, here are some things that might help:
Anxiety isn’t always a bad thing
I recently talked about my financial anxiety, how it’s hard for me to feel safe regardless of our savings account balance.
I’m constantly tensed for the next nasty bill. I know it’s coming, and I know we’ll have to do a financial tap dance to cover the expense. Sometimes, that means taking money out of savings.
This puts me in a mild panic mode. While I’m waiting for the statement to come due, all I can think about is how our balance will go down and how vital it is to get it back up. That alone deters me from (most) unnecessary spending.
In other words, my first bit of advice would be to add a bit of anxiety to your financial life.
Each time you have to raid your emergency fund, think how much less you’ll have to cover the next unexpected expense — and there are always plenty waiting in the wings.
If need be, get hard numbers. Count up how many times you’ve had to go off-budget in the past couple of years (or the amount of those unexpected expenses). Failing that, review your health insurance and calculate how much a serious illness — one requiring multiple doctors visits and a couple of different specialty tests (x-ray, endoscopy, whatever) — would cost.
Now realize that each time you touch your emergency fund, you’re that much more at the mercy of bad luck.
I’m not saying you should get to the point that you’ll be rocking back and forth in a corner. But a healthy awareness of your financial susceptibility might help.
Start a separate savings account
You may have noticed that I’ve only mentioned raiding our savings account for unexpected expenses. Taking the money out of main savings does two things:
- It causes the aforementioned panic, which keeps me honest.
- It keeps our emergency fund sacrosanct.
If you consider your EF untouchable, raiding it becomes painful. Therefore, spending it unnecessarily — even when it’s already broken — is unthinkable. Or at least far, far harder to think about.
Perhaps more importantly, savings is a nebulous amount. If your EF is supposed to be $1,000 and you take out $200, there’s another $800 that you see as inadequate and, therefore spendable.
If you have to take $200 out of your $400 savings account… Well, you still have $200 left in an account that doesn’t require a specific minimum or maximum for it to be “right.”
Obviously, building a savings account beyond the emergency fund is easier said than done. Which leads me to my next suggestion.
You already said you’ve tried a different bank. But have you tried Capital One 360? This would be good for a few reasons:
Get $25 for opening a savings account through the link I provided. You’ll have to deposit at least $250, but if you transfer in your emergency fund — even if it’s a work in progress — then you should have enough.
Take the $25 bonus when it arrives and start a separate savings account. As soon as your EF is up to $1,000, stop contributing. Focus solely on padding your savings balance.
Yes, it’d be nice to have more than $1,000 in your EF. But first you need enough in savings to cover small emergencies, allowing you to keep your emergency fund intact. Again, a nebulous savings goal is easier to backtrack on than a specific minimum EF balance.
Capital One lets you have as many savings sub-accounts as your little heart desires.
This provides an extra layer of protection for your emergency fund. Rather than touching the main savings account, you could raid something like a vacation fund. You might feel the sting of this even more than lowering your savings account balance, thereby deterring unnecessary spending.
If you have money in a regular bank — even without a card — you just have to visit a branch on your way to/from work. More difficult than the normal set up, but still not hard enough.
Getting money from Capital One 360 means I have to schedule the transfer, then wait two business days for the funds to be available. That cooling off period might be enough time to talk yourself out of an “Oh well, might as well” expenditure.
Really think about it
You worked hard to build that emergency fund/savings account/vacation sub-account. Do you really want to undo all that hard work?
Ask yourself this before you give in to a want. If that’s not enough, remind yourself how long it’ll take you to build the fund back up. You might feel so weary at the thought that you have to go home and lie down.
Cooling off period
I’m bipolar II, which means I have episodes of minor mania. Meanwhile, Tim’s got that whole severe ADHD thing going on. In other words, I know all about impulsivity.
Things seem so vital, so worthwhile right now. If you can force yourself to wait two or three days — say, while those funds transfer out of your online bank account — you may have a clearer idea of how much you really want that doodad.
If you can’t make yourself wait days, try a few hours. Even one hour may be enough.
Failing that, keep your receipt. If you have buyer’s remorse, you might be able to return the item and replace the funds in your account.
Stop your train of thought in its tracks
Tim was finally able to quit smoking because he realized that it involved a sort of grieving period. He kept stalling out at the bargaining stage.
So this last time around, he used an interrupter. If you’ve ever seen Archer, I highly recommend the one he chose: Lana’s “Noooope.” (If you haven’t seen it, there are plenty of soundbites online.)
Really, any interrupter will do. Just something that derails your thought process as it starts to rationalize.
Have any of you had this problem? How do you avoid the “Oh well” mentality?