How I Built an Emergency Fund, inspiration I deeply hope is helpful
As the blog URL says, this is not financial advice. This is how I did this thing, and I am posting it here, publicly, in hopes that it helps you should you need this information.
In short: Remix this advice to what fits your life + do not sue me if this goes poorly for you. This is for Americans, if you do not live in America and/or your money is not in America, I hope this is a useful base.
None of these links are affiliate links.
I write these things as a mental shift. I like to ramble and I wish I had someone tell me this stuff 20+ years ago. I'm hoping this helps you.
This is an incredibly long post so I'm putting it under a KEEP READING.
This post goes over two stages: "short term + not life-or-death" and "long term + actual life or death"
Part 01: SHORT TERM + NOT LIFE-OR-DEATH FUND
You need to find a high yield savings account that is FDIC insured. Ally is a popular bank for this.
Functionally, the only difference between a "high yield savings account" and "savings account" from the giant conglomerate bank down the street is the interest rate.
I do not know why non-high-yield savings accounts exist. I'm guessing because legally they can, and I hate it.
Moving away from my personal socioeconomic views to return to advice.
"FDIC insured" is not something you pay for. It is nearly universal on savings accounts. If a savings account, or a checking account, does NOT have it, then you should not put your money there. Something is wrong with that bank.
FDIC means if your bank goes out of business, your account is insured up to $250,000, per account, by the government. So if your bank goes out of business, the government makes sure you still have your cash (up to $250k).
A high-yield savings account means your cash is available whenever you need it.
Other products, like CDs, exist, but this ramble is designed to be as simple and starter as possible. Begin with a high yield savings account, build up from there as you do your own research + compare this to your needs.
Do not accept an account that has minimum balances. Do not open an account with monthly fees.
Touch this account as little as possible.
For every $1 you put in, every month, a few pennies will materialize. It's not much, but the main point is at every level, your money works for you.
Rich people do this. You can too.
Touch this account as little as possible.
You can have multiple savings accounts.
I personally have a savings account in the above structure designed for "oh hell I am kinda screwed, but will be okay, just need a buffer."
"How much should I have in there?" you might ask. Common advice says "3-6 months expenses" which is a lot. I say "start with literally $1 and continue as you can until comfortable with what is possible, for you, at this time."
Will $1 make you rich? No.
Will it save your life in a bad situation? Probably not.
Does this $1 essentially become a tiny robot that is making you money for as long as it is docked into its cargo bay? ...weird metaphor but we'll go with it, sure.
Ultimately is it a start? Yes.
You can have multiple savings accounts. You can have a savings account "this is for short term emergencies" and "this is for... slightly less short term" etc.
It costs you nothing to have multiple. They all operate in the same way. It's handy to have them all at the same bank because it can make transferring cash easier.
Part 02: LONG TERM + ACTUAL LIFE-OR-DEATH FUND WITH RISK SO BE CAREFUL
Once you have your savings account set up, and it's being funded on a regular basis (every week, every paycheck, every month, every quarter -- whatever works for you), look into creating a second, bigger, more dangerous-term cash reserve.
I like my Roth IRA. This is a link to a proper finance blog that has a lot of details. I am trying to make this handy/simple to get started.
401ks and (non-Roth) IRAs are funded with pre-tax dollars, frequently in conjunction with your job.
Normally, cash goes from job -> government takes a slice -> you.
Pre-tax retirement accounts, cash goes from job -> retirement takes the percentage you decide -> government takes a slice of what is left -> you
Roth IRAs, job -> government takes a slice -> you -> Roth IRA
The benefit to pre-tax retirement accounts being, because the cash going in is pre-tax, there is more of it.
It can grow faster in the stock market or other places your particular fund allows you to put cash into.
The taxes come out when you withdraw -- usually retirement -- because if you withdraw before you retire, you are heavily penalized with extra fees.
That's why Part 02 is a ROTH IRA. Your money has already been taxed -- job -> government's slice -> you -> Roth IRA.
This means the money is yours, already taxed. If you withdraw the gains, those get taxed, but the base, that's yours.
If you invest $100 and it grows to $105, you can withdraw $100 without paying fees or taxes. If you withdraw that extra $5, that is when taxes start to come into play. If you withdraw $100, and leave the $5, the $5 continues to grow, and that extra growth is taxed if withdrawn. So try not to touch it (ideally you leave all of it until retirement).
This is why this is an emergency, life-or-death only, account. You tap it only when you need to when all other choices are wretched and ruinous.
There is an annual limit as to how much money you can put into a Roth IRA (several thousand bucks).
You can start them very small. Like $20 or maybe less.
Look for a bank or institution that does not charge fees to open and maintain one.
AT EVERY STEP YOU SHOULD BE AVOIDING FEES
Here are smart people talking about ideas on how to get started.
Okay, so, what do we do now with this fancy roth thing.
Here is where things get... uncomfortable.
A Roth IRA is an account type.
You need to do something with your money.
The reason you have this in addition to, and secondary to, your high-yield savings account is because this is an investment vehicle, the balance is going to go up and down, and may reach $0.00.
For my Roth IRA, I like "exchange traded funds" -- ETFs.
There are a lot of options -- you can invest in most anything
Because my Roth IRA is built for "help me I'm dying" emergencies, I invest in a mix of S&P 500 index funds and small-cap funds.
SO MANY WORDS.
Let's break this down what this means.
S&P 500 index funds: This is an index fund of giant, giant, giant companies.
An index fund is like a stock. But instead of a single company, it tracks (owns shares of) an index -- like the DOW or Nasdaq. Or countries. Or... the entire market for oil. Etc.
The metaphor isn't completely accurate, but I like to think of it as "an index fund is a company that owns tiny bits of other companies."
Like, okay, say you have SlimeIndexFund and a share price is $40.
In this example, SlimeIndexFund owns $10 worth of "BardCo" and $10 of "ThiefCo" and $10 of "MermaidCo" and $10 of "EvilCo".
Let's say EvilCo does a lot of evil and is now worth $15, and MermaidCo does a lot of mermaid stuff and is now worth $15, and BardCo sings out of tune so is now worth $5. ThiefCo is oddly at the same $10 but we're scared so we're leaving ThiefCo to stay at $10.
A share in SlimeIndexFund is now worth $45. ($5 BardCo + $10 ThiefCo + $15 EvilCo + $15 MermaidCo)
This is diversification
Because I bought an index fund, instead of just buying BardCo, my risk is less.
Had I bought all MermaidCo, my return would be higher -- but this is a much bigger risk.
The entire purpose of this set up of a Roth IRA is TO MINIMIZE RISK.
Your Roth IRA should allow you to buy "fractional shares" and if it doesn't fuck that bank, go somewhere that does.
In the above example, SlimeIndexFund is $40/share and at that price you are getting the full benefit of 1 share.
Let's say you have $10.
You buy a fractional share of SlimeIndexFund for $10, which is 25% of 1 share.
So when SlimeIndexFund shares raise from $40 -> $45, your fractional share goes from $10 -> $12.50.
Not all funds and stock shares (etc) have fractional shares, most do.
It's a great way to start and build.
Small-cap funds: These operate in literally the same way. The difference is the companies are (in comparison) much smaller. They tend to be more nimble.
So I am diversifying between "here is a fund, it has a lot of large companies" and "here is a fund, it has a lot of small companies."
Let's say Big Office Building real estate goes down, but the sale of Small Company Making waffles goes up. This mixes together and I'm less in danger of losing money, or losing much money.
You can pick individual stocks.
The reason it is not recommended, by nearly everyone, is because the market has incredible tools and power over individual stocks.
By using any kind of fund that bundles things together, you are thereby automatically using these tools by proxy
It is critical to understand this is the stock market. Your account will go up and down. It may go down A LOT, like 25%, and take years to recover. Maybe it goes down 100% to literally $0.00.
That's why this is the LAST RESORT EMERGENCY FUND.
So why are we doing this.
This feels... wrong?
The potential for growth is significantly higher than a savings account. Adjusted for inflation, somewhere in between 6-7%.
At this rate, if you can leave your initial deposit alone for somewhere between 10 - 13 years, it has doubled.
This equation recalculates every time you make a deposit. So if you can deposit $20 every pay check, it has the potential to grow very quickly.
As above, this is the stock market, so it can also get wiped out.
But given the stock market has historically always recovered, though it may take several years, the risk is worth it to me + a lot of other people.
The reason this is built as a last-resort cash bucket is because of this risk. Before moving into this arena, you should have other cash buckets as a buffer.
Your RISK is it goes down. Which it will frequently.
Your REWARD is if it goes up. Which historically it has far more than it went down.
The PURPOSE of using funds as described above is so you don't have try to guess who the next Amazon is and wind up picking the next Pets.com (which went out of business, like, a long... long time ago).
The people making the funds figure out who is Amazon and who is Pets.com and work, day and night, to make your money grow and/or protect it when outside influences are hurting the market.
They are incredibly equipped to do this and their literal livelihood is on the line when they do it poorly.
Which is a polite way of saying, they are continuously incentivized above all else to work for the fund you're investing in.
The reason you're doing this in a Roth IRA specifically is you're hoping to keep as much of it intact, as possible, until you retire, at which point -- if you've followed fairly simple rules -- you withdraw the base and gains tax-free.
Whereas money in a normal stock account? Those gains are taxable every year.
"I have literally $20 I can save per pay check! Can I put in $15 into a high-yield savings account and $5 into a Roth IRA to get started?!"
Yes!
Also, congrats! You're diversifying already!
Your Roth IRA broker should allow you to invest a minimum of $1 at a time, and buy fractional shares. If they don't, don't sign up with them!
Lean heavily into your high-yield savings account until that is very comfortable and thick, then push money into the Roth IRA.
Your goal is to build a system that works for you -- both literally (money working for you) and emotionally ("this is comfortable")
"Should I pay off debt before proceeding? A lot of people say to pay off excess debt first."
This is up to you.
Most financial blogs etc. do say "focus on paying off debt first" -- it's good advice, your returns are risk-free and permanent, since the lower your debt is, the less you have to pay over time.
Interest -- working for you or against you -- is continuous and eternal.
Personally, I like to diversify everything, so I not-financial-advice ramble "do all three -- pay down debt, throw a little cash into a high-yield savings, throw a little cash into a Roth IRA"
The problem with "pay off debt first" is that it misses out any occasional giant gains the stock market makes (Roth IRA) and introduces the risk of "I have paid this credit card on time for 5 years, I'm short on change for 3 months due to a situation that gets resolved quickly, and now I have a late payment fee, and a higher interest rate."
Look at your life, finances, and potential future and make decisions!
And also:
Always be on the look out for deals with banks. Sign up bonuses, referral links from friends, etc. Think of it as a money sale.
If you are not comfortable with the idea of a Roth IRA hitting $0.00 potentially, do not do step 02. These are ideas, not directives.
All financial tools can be used for different purposes. All of them. Thus -- these are ideas, not directives.
I am listing a few examples of banks, funds, etc. These are not recommendations nor are they affiliate links. They are listed because I want to maximize your start on this path, but caution, in strongest possible terms, you must do your own research and figure out what makes sense for you.
There are a lot of nuances I am paving over for the sake of simplicity, which is why I am continually saying...
...c'mon say it with me...
...you must do your own research before continuing
Smart, free sites that cover this + a lot of other stuff:
NerdWallet
Bank Rate
One final note about Roth IRAs:
Robinhood currently is offering a 1% match on an IRA. Considering the strict limits of how much an IRA can intake per year, it's not much, but it doesn't cost you anything. Money on sale!
As a final note -- always feel comfortable asking people handling your money for help. They are working for you. Your money works FOR YOU.
If you are uncomfortable, leave, immediately, without concern.
At the retail level, there are hundreds of banks and financial institutions clamoring for your business. If someone makes you uncomfortable for not knowing something, or getting a term wrong, or asking "too many" questions -- go somewhere else.
It doesn't matter if your account is literally worth $20.
They are working for you.
This is a business transaction, and if they make you feel like your time isn't worth their business, I promise you there is someone else who will gladly take care of you.
I end with -- whenever someone is giving you financial advice, always ask why. It helps ensure they aren't scamming you, it's just a good business practice.
I like to ramble, it helps me mentally
I like to be useful, I want the world to be significantly more balanced in terms of who is doing okay
I like to write, this is all good practice for me in doing Various Other Things I do
I fucking hate predatory financial practices. I was gatekept out of financial literacy for decades and so every time I help someone else figure out how to set up their own life and protect themselves it is a giant "fuck you" to the systems and directly to the people who stood in my way.
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Open blinds (Pedri × Spanish streamer! reader)
Warnings: kind of suggestive, fluff, lots of Spanish, mentions of Spanish streamers
Masterlist
You will have to convince Pedri to stop being so cute while sleeping so you can get mad at him.
You love being with him in Barcelona, waking up next to him and all, but he really needs to start closing the blinds before going to bed, because you are not sure you will keep on living if you have to wake at 5 am every morning as the sun hits you on the face.
Pedri has his arms slung over your waist as he is in a deep slumber, and you can't help but stare at his relaxed expression. He is so lucky he is free today, while you will spend all day running around because of La Velada del Año 2, luckily, you still have a few hours before having to meet everyone for breakfast, then preparing, then presenting the event alongside Cristinini, all rewarded by the afterparty.
You cursed the moment you accepted Ibai's proposal to present the event. It wasn't like you needed the hype, 250k viewers minimum per stream was what every streamer dreamed about, and you could have comfortably watched the event from Pedri's coach, or even your own if he had the energy to go to Madrid.
You started squirming under Pedri's grip, trying to turn away from the sun as he stirs awake.
"¿Qué haces?" he groans, eyes fluttering open as he pulls you closer to him. (what are you doing?)
"Dejaste las cortinas abiertas otra vez, Pedri" (you left the blinds open again, Pedri)
"Mmmm, lo siento amor, pero es muy temprano para tener esta discusión" he says while cuddling closer to you, an strategy to get into your heart (sorry love, but it's still too early for this discussion)
"Igual dudo me pueda volver a dormir" (still I doubt I can go back to sleep)
His brown eyes finally stay open as he looks down at you, he gives you a suggestive smile "Yo sé de algo que te cansará" (I know of something that will tire you out)
You gasp mockingly "Pedro González López, ¿te me estás insinuando tan temprano?" (are you trying to seduce me so early)
He pulls off a innocent look "No me atrevería, " he smirks "pero tampoco lo niego" (I wouldn't dare, but I don't deny it)
He spins you both, you lying against the bed as he stares down at you. He leans down, places a kiss on your forehead, cheek, lips and neck, then scoots lower, and buries his head in between your legs, you for surely have a long morning ahead of you. You try your best to fake innocence when all your friends give you weird looks at your late arrival, flushed cheeks and messy hair.
He for sure will tease you when that faraway look still hasn't gone away by the time you are on live.
You guess you will have to do the very same to him so you are at the same level.
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