If emergencies of the non-medical variety were to happen, YOU would likely be dealing them. your DrSpouse is busy handling other people’s medical emergencies instead.
It’s the life of a medical family.
These are examples of emergencies you deal with:
- Car transmission breaks
- ER visits
- Pet illness
- Power outage or flood
- Last-minute flight for a funeral
- Unplanned pregnancy (a wonderful thing, just not for your wallet)
Having an emergency is a matter of when, not if.
You need a plan, friend.
Without a plan, you’re likely going to whip out your credit card and charge it. The problem with credit card is you will be drowning in high interest later.
And most Americans do.
We have a crisis where 46% of the population wouldn’t be able to come up with $400 if needed in a pinch, according to this study.
This won’t be you because we’re going to prep you and talk about emergency funds.
What Is An Emergency Fund?
An emergency fund is a liquid pot of money set aside to prepare for financial shocks.
How Much Do You Need In It?
You need 3 months of fixed* expenses saved up in it, whether you’re in attendinghood or during training.
*fixed = all your necessary bills like rent, utilities, and food are paid. You’re not saving for retirement, going out to eat, or shopping. You’re surviving, but not thriving.
If you have been around many finance blogs, you know that Dave Ramsey says 6 months. Sue Ozman says 8 months. Other financial gurus say 12 months.
I know, I said 3 months.
“Why so little, Theresa?”
Well, if you’re still in training AND raising a young family paying for the boards, interviews, and student loans, 3 months is realistically all you can probably muster. If you’re a young attending, more than 3 months is potentially a lot of money not working for you.
That’s why 3 months works specifically for medical families.
How Do I Know What 3 Months Is?
To find out this number, use Mint to track your spending. It’s FREE and the DocWife.com household uses it.
Figure out how much you spend in one month. Multiply that number by 3, and you get three months.
How To Create A System Of Saving For An Emergency Fund That Actually Works?
The way is for you to build your emergency fund and save money is to Pay Yourself First (PYF).
Warren Buffet said, “Do not save what is left after spending; instead spend what is left after saving.”
Order absolutely matters.
The PYF tactic means making it come automatically out of each of your DrSpouse’s paycheck before you even have access to it.
When you make a behavior automatic, it takes out the emotion and decision-making so it’s out of mind, out of sight.
If you’re in training, set up your direct deposit to automatically deposit 10%, 15%, or 20% of his paycheck (whatever you can do) into a savings account.
If you’re in attendinghood, set it to at least 20% or more.
What Kind of Savings Account Should I Use?
Saving accounts with brick and mortar banks now offer insulting interest rates at around 0.3% 😒 (I remember the hay day when they used to be 5%. Maybe you do, too. Gone are those days. For now.)
Good news is savings accounts with online-only banks are offering somewhere between 1.0 and 1.5%. These don’t have the same overhead as brick and mortar banks and are able to pass their savings to you. As long as it’s FDIC-guaranteed, it’s safe.
Personally, we’ve used Alli and Capital One 360 with rates around 1% at this time and have no problem recommending them.
If you need a place to park your emergency fund, check bankrate.com for current rates of various saving accounts for the best one.
Where NOT To Keep Your Emergency Fund?
Do NOT put your emergency fund in the stock market such as your 401k/403b or IRA.
Money in the stock market is meant to stay in the market for the long-term. It should weather highs and lows over decades.
If you make your emergency fund your 401k/403b or IRA and the market goes down at any one time, you could lose all your money at a time when you could need it.
Here are key takeaways:
- Have 3 months worth of fixed expenses saved up in a savings account.
- Pay Yourself First (PYF) by automatically direct depositing from your payroll.
- Park your emergency fund with an FDIC-guaranteed bank with high interest. Shop for them on bankrate.com for the best rate.
- Do NOT park your emergency fund in the stock market.
Your DrSpouse is already having to deal with emergencies at work. So family emergencies are just another challenge in a medical family.
Have an emergency fund so you can absorb the financial shocks throughout your life so you’re not whipping out the credit card and carrying a balance every single time this happens and then drown in high interest down the road.
You got this, girl.
I am hugging and supporting you ❤️
To strong medical marriages,
What kind of financial shocks did you experience during training?