This is Why I Have Emergency Reserves

My emergency reserves situation currently looks like this:

  1. Auto insurance deductible: $1,016
  2. Health insurance deductible: ~$920
  3. Renter’s insurance deductible: $508
  4. Job loss fund/general reserves: $21,600 or 6 months expenses at $3,600 per month (expected new level), with the first $7,200 or 2 months expenses at my credit union

I’m not completely convinced that this qualifies as an emergency, but I was definitely worried that my finances were going to contract with moving to a new apartment. I ended up paying more than normal in rent for the month of February (overlapping rent between the two apartments) and I also had to pay an application fee and shell out a refundable deposit.

This is exactly why I have emergency reserves. I didn’t think I would need to use more than $5,000 out of my emergency reserves, but I actually ended up using under $2,000.

On top of that, I’m having some out-of-network insurance costs which were unexpected to begin with, but also higher than “normal” since I pay a slightly higher rate on out-of-network charges. Thankfully, I have an out-of-pocket maximum which I will hit before using up all of the reserves for my health insurance deductible.

I’m going to use my reserves for my health insurance deductible to cover all of my out-of-pocket health expenses for the rest of the year. That way, I’m not worrying about my cash flow contracting due to the additional expenses and instead, I’m taking care of my health.

I’ve been using my reserves for the health insurance deductible to cover my out-of-pocket health expenses this month and I will continue to do so for the rest of the plan year (through the end of March).

The new plan year starts soon, at which point my deductible would be fully reset, with new funds available from my employer to cover it and fresh funds in my FSA. Since my FSA and my employer’s funds cover my deductible and a little bit more, I should have a few months before I need the funds out of my health insurance deductible reserves, if at all. I’ll set aside some savings starting with my April paycheck to help refill the reserves.

I am so glad that I specifically set aside money for my health insurance deductible, in addition to 6 months of expenses at my previous level of spending ($3,000 per month). That definitely helped my sanity and financial anxiety at this point with all of the other (e.g. moving) stress going on this month.

This is actually the first time I’ve had to dip into my emergency reserves since I started my job a few years ago, which is a really good feeling. Now I’m realizing exactly why you keep them in cash and somewhat easily accessible. I’ve also been using my emergency reserves for the various moving expenses.

Readers, when is the last time that you used your emergency reserves?

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  1. #1 by NoTrustFund on February 28, 2012 - 6:21 pm

    I don’t want to jinx myself, but we have not had to use our reserves in quite a while. I am knocking wood as I write this!

    I have a similar system to you whereby I keep 1-2 months of our emergency fund at our bank and the rest in an online savings account that earns a teeny tiny bit of interest. At least it is something.

    • #2 by Leigh on February 28, 2012 - 8:56 pm

      Woo! My credit union dividend rewards checking account offers a very good interest rate on the first $X,000 and since that’s more than the $7,200 I keep in my checking account and the rate is better than the Ally rate, I actually earn more interest on the balance at the credit union!

      I’m learning with the large down payment savings account that 0.84% of quite a bit of money is still a reasonable sum. Not as nice a sum as it would be if it was 3-5%, but still not a bad sum.

  2. #3 by Angella on February 28, 2012 - 9:36 pm

    Wow those are some great reserves! That is awesome. We’re not there yet, trying hard. Uhh…our measly savings took a huge hit recently when our 2nd car died and we had to get another (we both have long commutes, and no public transportation, boo). Then 2 weeks after getting a car, it started having problems and that took another $700. I feel like we’ll never get ahead sometimes, but we’re trying!

    • #4 by Leigh on February 29, 2012 - 11:39 pm

      Wow, no public transportation? That sucks! Good luck – trying is an excellent first step :)

  1. February 2012 net worth update (+1.2%) « Leigh's Financial Journey
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