Now this should probably be ranked as an Investment Goal #1, but as I already have goal one and goal two defined, I will keep this, probably, most valuable goal to build up a starter emergency fund as goal #3
As they say, you should have in your emergency fund about 3-6 months of expenses in savings to have a good sleep. Since the last time I counted our family expenses on a monthly basis (Cost of Living in Tbilisi (Republic of Georgia)) has already passed more than two years I'm not sure how much actually we spend in a month.
For the ease of this article, I will stick with a $2,000/mo
For a good life in Tbilisi, you should expect to spend about $1000-$2000 per month.
Now, that would mean for 3-6 months emergency fund I would need to save $6,000 - $12,000. That's a load of money, and in the fact, my total investment portfolio is just barely larger than 6-month savings.
Which leaves to build up starter emergency fund, the idea inspired by Dave Ramsey:
You may already know that Baby Step 1 is saving $1,000 for a starter emergency fund. It might seem daunting to save up that much money, but you can do it! Even if you've never held $1,000 cash in your hands before, there are plenty of ways to quickly earn the money. Then you can stash it away in the bank for a rainy day.
$1,000 in the emergency fund could sustain just about 2 weeks from our current expenses, that sucks. But hey, I should start somewhere, right?
What is an 'Emergency Fund'
An emergency fund is an account for funds set aside in case of the event of a personal financial dilemma, such as the loss of a job, a debilitating illness or a major repair to your home. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to draw from high-interest debt options, such as credit cards or unsecured loans.
So, What's the plan?
I will use kind of dollar cost averaging to reach this minimum $1,000 starter fund, hopefully by the end of 2018 (I still keep investing heavily on monthly basis, and indeed, right now it seems hard to find free money to put inside the emergency starter fund. As there are still 10 months left until the end of the year - it would ask to put aside $100/mo. With my current investment strategy and lifestyle - hard but doable
For this starter emergency fund, I will use hard cash only, no savings account. Which means saving in a jar.
To reach this goal sooner, while still writing this article I've put into my starter emergency fund EUR 60 ($73.45). $926.55 to go
Emergency only, no Investments or Flat Screen TV
This money should be separate from investments nor spent to buy a fancy phone or flat screen TV. Emergency only.
Although it might be tempting to invest this money and earn some interest, I won't, that's why I'm sticking with hard cash and a jar.