Saving For Unexpected Life Events

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Shorter Version

Est. Reading Time: 1 Minute

Fed survey shows 40% of adults still can’t cover a $400 emergency expense” and “Here’s Some Money Advice-Just Buy the Coffee” have very different messages. One wants us to be alarmed at how little we save and the other wants us to not feel guilty about our spending. If you get a lot of your information about saving your money from online sources, it’s understandable that you might be confused and frustrated with the contradictory messages out there.

So what do you do?

Save or spend or some of each? This is now where you are starting to hear your mother or father’s voice in your head, right? Hold on. Choosing whether to save or spend your money is not supposed to be a character judgment.

Saved money is a resource you can use as an option and choice when unexpected life events arise.

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Longer Version

Est. Reading Time: 4 Minutes

Saving for unexpected life events

Why do we need to save in the first place? Say you have a killer job, roommates you love, and you’re in good health. You have all you need right now. However, what if an unexpected life event happened? How would the rest of your life respond? Would losing your job, for example, cause you stress and affect your ability to pay your share of the rent? When you have a cushion, like extra money, you take some of the guesswork and uncertainty out of managing unexpected life events like a job loss or illness. Situations like these are why adequate saving is a critical tool for protecting yourself against life’s uncertainties.

What is adequate saving?

Most financial planners will tell you that you should save the equivalent of 3-6 months of your monthly income in an emergency fund. For someone who lives within their means, having 3-6 months of income saved could mean that in the event their regular income ended, they would be able to meet their current expenses plus have some spending money left over while buying them some breathing room to contemplate their next move. 

If money is already especially tight, an alternate method to prepping for unexpected life events is to save the equivalent of 3-6 months of the cost of basic expenses in your emergency fund instead. Basic expenses mean just what it sounds like, your shelter, food, clothing, transportation, and healthcare needs, plus any debt payments. The tradeoff is that saving only the amount needed to cover your basic expenses means you will have nothing available for discretionary spending. Regardless of which type of savings plan you use, you will first need to know how much your basic expenses actually cost.

Researching your expenses

If asked, most of us could give a ballpark figure for each of our expenses. For savings purposes though, you want to know as close to an exact total of your expenses as possible. This is true whether you choose to save based on your monthly income or your monthly expenses. 

There are several ways to track your expenses. To start with, there are multitudes of online programs and apps that will let you enter your expenses manually. Some of these products offer the ability to link your bank account so you will have less data entry but you will still have to check that your expenses are put in the right category (doing this myself I found a restaurant meal was marked as ‘household’ for example).

Other people like to use an Excel spreadsheet or even just a plain lined notebook.

However you choose to do it, the important part is that you capture each and every expense you have and its exact cost. You should track your expenses for at least one full month to get the most accurate picture. Some expenses like food and clothes are going to vary so you may want to project those expenses on the higher side to give yourself some margin for error.

Getting your savings plan going

Once you have an accurate number for your total monthly expenses, and you have decided whether to save based on income or expenses, it’s time for you to implement your savings plan. The easiest way to do it is to automate it. This means setting up a reoccurring automatic transfer from your checking account to your savings account, preferably for the same day that you are paid so that your savings are the first ‘expense’ paid. 

Most credit unions and banks offer automatic transfers with no fee (especially if your savings account is at the same institution as your checking account). If you are not comfortable with having an automatic transfer because, for example, the amount or the dates that you are paid varies, then you will have to be a little more mindful about making sure to ‘pay yourself first.’ Set an alert in your phone or your laptop for a specific reoccurring date to remind you to make your savings contribution regularly and on time.

Saving money as a mindset

In her 2012 Rand Corporation sponsored dissertation, Saving For The Future: Trends, Patterns and Decision-Making Processes Among Young Americans, Sarah Outcault notes “saving requires deferring the use of resources to a future period. Thus, the opportunity cost of saving is the consumption one forgoes in the present to fund consumption in a future period.” What she means is that when you save money you are giving up using that money for a benefit today in favor of using it for a potential benefit in the future. It is this idea of forgoing an immediate gain for a future one which makes saving money difficult for so many people. 

With social media pressure to have instant enjoyment, it can be a struggle to develop a delayed gratification mindset. An alternative is to reframe your viewpoint. You could choose to see saving your money as a gift you are giving yourself for example. You could take this further by keeping a journal of what benefits you see coming from this gift as a reminder for when your mind wants to swing back to negative feelings that would threaten to undermine your efforts.

Another strategy would be to use an accountability partner. 

Choose someone you can trust to have your best interests at heart; share your savings goals with them and ask them to remind you of these goals when you are feeling discouraged.

Actionable Steps


Write it all down

Track the cost of your expenses for at least a month so you know your exact total of expenses.


Decide your measurement

Decide how you are going to measure your savings. 3 – 6 months of income or 3 – 6 months of expenses?


Make it happen

Implement your savings plan through automatic transfers or by using reoccurring reminders.


Change your mindset

Change your mindset about savings. Use tools like a journal or find an accountability partner to keep you motivated.

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About the Author

Dawn Torres-Gale, AFC

Dawn Torres-Gale, AFC

Accredited Financial Counselor

In 2008, Ms. Torres-Gale was chosen by the Financial Industry Regulatory Authority (FINRA) Foundation to be part of a select group of military spouses. Through this, she received FINRA sponsored training from the Association of Financial Counseling, Planning and Education and became an Accredited Financial Counselor® in February 2012.
Full Bio | Connect With Dawn | LinkedIn

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