Tip 09: Build Your Emergency Savings for Travel
Better to have it and never need it, than need it and have nothing saved.
We’ve talked about the importance of budgeting for travel, making money while traveling, and planning for an emergency exit. But, what about having an emergency fund to cover the cost of unexpected crises or big expenses that can occur along the way?
Having an emergency fund when you already need cash to get started with your trip might seem like an extra burden. But, I can tell you that everyone I know who travels full-time has a backup plan and an emergency savings account.
Why You Need an Emergency Fund
Traveling is expensive and the more miles you put on your vehicle, the more likely it is something will break. Even my incredibly reliable Toyota FJ Cruiser has needed new headlamps, new brakes, and a new fuse. I have also replaced the battery on both the truck and the trailer.
When you travel during a pandemic, there’s also the likelihood of getting sick and needing emergency care.
Here are some instances when you might need that travel fund:
You lose your job or you aren’t getting as many client projects recently.
You, your travel partner, or your pet needs immediate medical attention and health insurance won’t cover the full bill.
You get into an accident on the road and need to pay your deductible.
Someone stole items from you that you need to replace.
How Much To Put In Your Emergency Fund
The standard rule of thumb is that you should have at least 3 to 6 months’ worth of money saved in an emergency fund. This helps to ensure that if you lose your job, you have enough time to find something else before running dry.
For many people, this is just not a realistic number. Imagine, for instance, someone who makes just $25,000 per year. That’s enough to travel frugally on, but probably not enough to squirrel away $6,250 to $12,500 into an account.
Review your budget. Estimate how easy it is for you to make money. Determine how good of an exit strategy you have. Then, set an amount that meets that. Personally, I think if you don’t have at least a month’s worth of expenses saved, you’re playing with fire.
How To Create Your Emergency Fund—And What Mine Looks Like
If you’re a paid subscriber, next week, you’ll receive an email showing you a detailed look at an actual emergency fund—specifically, mine. I opted not to rely on a savings account alone. In fact, most of my “emergency fund” has absolutely nothing to do with cash or saving money at all.
If you’re not a paid subscriber, see you in two weeks! Feel free to suggest topics you’d like me to cover by sending an email or by leaving comments on the website version of this post!