Emergency Fund vs. Savings Buckets: Why You Need Both and When to Use Each | 490

0:00Here's the deal. An emergency fund is for emergencies, but most of what keeps messing up your monthly budget is your unexpected but actually expected expenses expenses. Yeah, and that's why when you're first getting started, having savings buckets beats having a massive emergency fund because it helps prepay for all of those, like Shana said, unexpected expenses like Christmas and annual bills, car maintenance, auto insurance that we always have to pay for, so you don't resort to going back to using credit cards or raiding that emergency fund. Right, and so today we're just going to break down the difference between an emergency fund and savings buckets and when you should do both.

0:36Do you make good money but have nothing to show for it? Are you tired of living paycheck to paycheck? Do you have big dreams for your financial future? Do you want to get debt-free, but you don't want to live on beans and rice? Or you don't want to give up those pumpkin spice lattes? Hey, it's okay if you don't already know how to budget, or if you're using credit cards to get through the month. Hey, it's okay if you want to seem like you have your finances all together, or you're not on the same page with your spouse when it comes to finances. We know what you're doing probably isn't working, but guess what?

1:05You're in the right place. We're Shana and Vanessa. We're best friends, business partners, and master financial coaches trained by Dave Ramsey. We've been in business since 2019, helping hundreds of amazing people like you create budgets, get out of debt, stop living paycheck to paycheck, and know exactly what to do with their money. In this podcast, we'll share with you everything we know, plus everything we're working on with our clients so that you have the best chance at reaching your financial goals. We want to help you take the guesswork out of your budget, improve your marriages, and even bring your kids in on the conversation.

1:37We can help you no matter where you're at, whether you're the single mom who's never had$500 in her savings account or the millionaire who's paid off four real estate mortgages. And we're not going to shy away from the tough love. We'll tell you what you need to hear and encourage you at the same time. This is the Financial Coaching for Women podcast. We have a wonderful bootcamp coming up at the end of December on the 29th for the entire week. It's really going to help you set up 2026. Yeah, you have got to sign up for it. You just go to budgetbesties.com forward slash bootcamp. And like we've been saying, Vanessa, they don't have to do anything right now.

2:08You don't have to actually do anything. Just sign up, be a good girl and sign up now. That way after the holidays, when you feel like you actually have a moment to breathe, that's when the bootcamp is and it'll be perfect for them. Yeah. It's going to the grocery store hungry when you're making bad decisions or you're going to make the decision now to set yourself up and you're going to, like Shana said, go to the website, sign up. So you're all ready to go after Christmas. And then I feel like it's going to be like, uh, you can just go through the holiday season. See no evil. Don't worry about, I'm going to get my life together after the holiday season when I go to the bootcamp.

2:34So again, budgetbesties.com forward slash bootcamp. But today we just want to explain to you what the difference is between what the emergency fund is, what savings buckets are, and what order you should do them because there's some other ideas out there. And obviously we have the right idea, Vanessa, so we want to tell them the right idea. Sure. And I think people, they misinterpret the difference. Like they don't understand if I have an emergency fund, why do I need savings buckets? And if I have saving buckets, why do I need emergency funds? It's going to kind of give the air, break it down and show you that you do need both.

3:00Yeah. And so the first thing to do really quick is just define the terms that we're talking about here. So your emergency fund is usually going to be based off three to six months of your income. It's going to have a lot of your, the amount that you're going to have there is varied by your dual income, how steady, how secure your income is. There's a lot of different things that might, but that's generally what it is. And it's actually for emergencies. So when it's unexpected, urgent, and necessary, those are the reasons that we dip into the emergency fund. Yeah, and you're making your budget based on what your income is allotting you.

3:30So we need to know how much income you need for an emergency fund to be able to make your budget work. So the savings buckets, the difference here is savings buckets is based on everything that you are spending for in the future. So we're talking about vehicle maintenance. We're talking about Christmas, clothing, those travel ball fees that you have every twice a year or so. We're talking about the oil changes. there's just a lot that trip that you always go to Thanksgiving because it's been planned by your grandma and that's something that you can't ever get out of all the things that you absolutely know that you're going to be spending money on that's what we want to put in save for in your savings buckets and the key word here is emergency fund is unexpected and so we're going to teach you about the savings buckets here in a minute but you're needing tires is not unexpected you guys if your engine blows up that's an emergency nobody saw that coming right you're going to need tires so that's the difference.

4:20You'll save for the things that we know are coming. And then we can also have some other money set aside for something that we absolutely could not predict. If having a fully funded emergency fund, according to Dave Ramsey, is step three, right, Shaina, and his baby step, which is a lot of money. And when you're thinking of trying to save for three to six months, like Shaina said, based on your income level of your dual income, one income, and it all, it's very household specific, but that is a lot of money and that can stress some people out. Yeah. And it also doesn't come till step three, which means you had to get out of debt before you could save money.

4:51And we've talked about this before, but we started doing what we're doing, budgeting, because they don't teach you how to budget. And when we teach you how to budget, we want you to think about what you need to save for because those tires are coming. Christmas is coming. The annual HOA feed, all of that's coming. And so we have to start to save for it regardless of what's going on elsewhere and what cookie cutter step system you're using. Yeah. So, you know your savings buckets are absolutely needed especially the non-negotiable ones while you're paying off debt when we're talking about annual bills like shannon just noted the hoa fee some of those are really hefty and so you need an auto insurance if you pay that every six months or annually some of those they are a lot of money and so we want you to be putting that in your budget so that way when that comes you're not having to pull or two or three thousand dollars out of your budget because you paid it once and you're like oh thank god i don't have to worry about that for another 12 months.

5:43No, you need to start budgeting for it in the moment. Yeah. And so what we know is if you don't do the savings buckets, this is when you resort to using credit cards, or if you do have some random savings account that nobody really knows what it's for, that's where you pull from, right? So that's why it's important to do this regardless of what quote unquote step you're in with. If you're doing Dave Ramsey's program, you've got to get these savings buckets started so that you don't go further into debt or just come up with stealing money from somewhere else. I want to talk about that emergency fund or that savings account that you have that you're dumping money into really quick.

6:14We have a lot of people that come to us and say, hey, I'm just putting $25,$50,$100 a paycheck into this account. And then somewhere down the line, I end up pulling it and there's nothing in there. The reason why you're doing that is because it doesn't have a purpose, right? So you're quote unquote, trying to save money. You're trying to build an emergency fund without a purpose. And so we're not building a budget properly. So then we, like Shana just said, we resort to just pulling that money out and we want to stop that. Yeah. Okay. So we have six steps for you to do what we want you to do, which is the right way guys.

6:42It's going to be, it's going to be great. You're going to love it. So the first step is that you obviously have to get your budget set up. Like Vanessa said earlier, you need to know what you cost. You need to know what your expenses are, what, how much do we spend on food? All of that kind of stuff. Because if you don't have a budget in general, then we aren't going to be able to do any of this. So then the next step is to build your emergency, your mini emergency fund. This is going to be different for every client because we have some people that are single and we're like yeah I think five hundred to a thousand dollars is enough for you based on your situation are you renting do you own a home and then we have some people that have six kids and they have their own business so it's very inconsistent like their income is very inconsistent we're not really sure what's happening so we don't just recommend a thousand dollars so where the noise out there is that you're supposed to save a thousand dollars in your emergency fund mini emergency fund we don't agree with that yeah it's definitely like Vanessa going to be different for every person and I had a client where she's I'm not going below$5 ,000.

7:34And I was like, okay, we can be paying off some credit cards, but that's fine. And that's what made her feel comfortable. And then once she had that, or she had that set aside, she was willing to put everything else on debt once with along with her savings bucket. So you just have to figure it out and understand, we do agree with Dave, this is not a long term situation, right? So yes, it's going to be a little uncomfortable that you don't have a million gazillion dollars saved up. But there's a reason that you're doing this now, right? There's a reason for restarting this or starting this journey.

7:59So it's going to be a little uncomfortable, but it's okay because we have, I feel like the gap, we're bridging the gap with the savings buckets where you don't have to be as scared as you might be. If you, if the only thing that you were relying on was that thousand dollar or that mini emergency fund. I do feel like the savings buckets, Shana, is like that missing piece of the puzzle here. So step three is to brainstorm what your savings buckets are. And we're talking about the non-negotiables, your annual bills, the car insurance, the oil changes on your vehicle, how much you spend on birthday presents a year.

8:28You know that your child always plays a certain sport and that's a non-negotiable for your family. You just really need to sit down and think about what are the non-negotiables for you and put that on paper so you know what you're looking at. Yeah. And we have plenty of podcasts on savings buckets, so you can go back and look. But like Vanessa said, there's usually, maybe you have one for your home maintenance. You have one for vehicle maintenance. You have one for Christmas, for gifts, for other stuff, for travel, for the annual bills, for your pets is another one that often happens. Sometimes clothing.

8:55What else are we missing Vanessa? So what else is on that list? We're like trying to picture it in our head. Medical can be one that people have. And so, yeah. So those are the things that, and as Vanessa said, it's non-negotiable. We don't get to have maybe right now in the beginning, every savings bucket and everything in the savings bucket that we might want eventually. It's really going to be like, these are the things I know I'm paying for and I'm going to go ahead and set them aside for sure. Yeah. Because again, having to come up with a couple hundred dollars a month to be able to fund that versus thousands of dollars in the moment feels a lot better.

9:24And then isn't it true that it feels like all the thousands of dollar ones are due in January or whatever? One time, all together, yes. So definitely want to spread that out. So then after that, the next step is going – then we think, yeah, let's get a little bit more serious about paying off debt. Yep. Yeah, no, absolutely. So we want – step four is going to be now that you have the non-negotiables in your budget for your savings buckets, we want you to focus on putting every extra dollar now that you have on to paying off your debt. And I do want to caveat the non-negotiable savings buckets.

9:52We do believe that you can be bougie on a budget. So for you, that might mean, look, we're going to, we're funding travel and Christmas, but we don't, I'm not really, we're not doing a lot of kids activities or we're not, there's no glam up or we're not doing a lot of home projects or whatever. Like you, it's not that you can't have anything or that you should only have what you, what the bare bones is, but it is like, you have to balance your goals, right? If you really do want to get out of debt, then you can't have every single savings bucket. So you just want to make sure that you're balancing what, how you want to be busy with your budget and with your priority to pay off debt if that is a priority and i think that's a good point because it's give and take here right so you can have your vacations but maybe you don't have 20 subscriptions to online streaming services that you don't use or you've been paying for a gym membership that you're not going to and then all of a sudden you want this and that also no like we want you to pay for what brings you joy and what you love but also if you're in a lot of debt you probably need to sit down and make some decisions which is why making a budget on one sheet of paper, which is what our simplified budget system does, it allows you to see everything as a whole and so you can make some really good decisions for you and your family.

10:56Yeah. All right, budget besties, it's time for some real talk. You don't need another budget. You need a budget system. Our simplified budget system is what you've been looking for. It's going to allow you to be bougie on a budget. You'll be able to easily set up a system that runs automatically and shows you exactly where your money is going. And it's going to give you permission to spend. Everybody loves that. Yeah. It's straightforward, pretty, and packed with walkthrough videos that break down the exact methods we use with our clients to get out of debt, set up a bills account, separate spending, build savings buckets, and end the paycheck to paycheck feel.

11:33If you're new to budgeting, this is the perfect way to jump in. And if you're already a budget nerd like us, you're about to meet your new obsession. This is the upgrade to your finances that you need right now. Yeah. So head on over to budgetbesties.com forward slash budget and grab yours. Now back to today's show. So what we've done is we've gotten a budget set up and we blew through it. But everything that happens in your life and all the ways that you cost money are on that one budget, which is really important to see. Then we've set up a mini emergency fund. Now we're starting to get our savings buckets going.

12:06All the ones that we've decided are more important than paying off debt or more important than having a huge savings account. And then we've started, we've figured out how to start paying off debt once you feel good about that. So this is also different, Vanessa. sometimes people don't want to pay off their vehicles or like their mortgage or stuff like that they want to just go ahead and start putting more money into savings buckets or into their emergency fund which is the next one which is a bigger emergency fund yeah and i think again this is why we don't do a cookie cutter system and this is why we don't have a this is what you have to do every single time because it's based on what people want people come to us for coaching and their goal is not to get out of debt they're and they're totally fine with that so building this next this the bigger emergency fund is really going to be like okay now that i have my budget set and i know what i cost including having my savings buckets in there how much do i need in an emergency if i were to lose my income how much do i need to make sure i'm covering just the bare bones which would be things like auto insurance if you pay if you're not paying it monthly we need to make sure we're having those big expenses in there because we don't want to be caught off and be surprised when they come due and you forgot to put them and include them into your emergency fund Yeah.

13:13And just a reminder, you might be thinking, why do I need this bigger emergency fund if I have all of these savings buckets? The emergency fund, to reiterate, is for things that are unexpected, urgent, and necessary. When your air conditioner goes out in summer, I'm not speaking from experience. Oh, I did. That happened to me too. That's an emergency. And that's not, you're not saving for that necessarily. You could be if you got really nerdy with your budget, but, or literally if your tire blows in an, because some weird freak accident or something, that's an emergency versus all the savings buckets are saving for things that we know are going to happen.

13:49And so we want that bigger emergency fund. And it's also for things like losing your job, which no savings bucket is going to cover for that. So we need to have the emergency fund for those kinds of situations. And this is a one-time thing versus the savings buckets are going to constantly always be, you're going to always be filling them and using them back and forth versus the emergency fund you may or may not use at any given time. Yeah. It's like a revolving door, those big circle doors at the hotels at the fancy one, right? So it's like money's going in, money's going out of your savings buckets all the time versus your emergency fund.

14:18You're going to pick a number and go, okay, this is how much I need to replace my income in an emergency. So that way I have that. And once you hit that number, you're not going to really be funding that anymore. Yeah. And then just really quickly, if you do use your emergency fund, you can refund it in next month's budget. Just like a little bonus pro tip. Okay. So step six. Okay. Now we're good. Okay. We've got the savings bucket set up. Like we're fully funded the emergency fund. We have our debt paid off the ones that we want to pay off. Now let's go back to your savings buckets and go, okay, what is the vision?

14:51What, how many vacations do I actually want to take now that I have the wiggle room. Remember, all of this is creating wiggle room in your budget. So now that you have that extra money and it doesn't have a specific job because you've already done everything, now let's readjust our savings buckets. Yeah. And that can mean we want to do go bigger on Christmas or that can mean now we can start thinking about travel sports or private school for the kids or whatever. It's whatever you guys think you want to have those bigger eyeball looking dreamy vision of savings buckets. Instead of what we said before, it's not necessarily a bare bones, but it's like a little bit less than what we could have, what we want in the long term.

15:30And now we're here to the long term, the long run, because when I said I paid off my debt and I've got that bigger emergency fund. So now every little bit extra dollar in my budget, I can put towards bigger, exciting things if I want. Yeah. So we completely added on to our back, the back of our house and we have a massive patio that wasn't cheap. So we just different things like that. Is there a new car that you may have wanted? There's everybody has different goals and your goals don't match anybody else's. So don't look at anybody else or ask anybody else what their vision is for their life to decide what you guys want.

15:59And this is a great way for you to fund it over time and not feel like you have to come up with a big chunk of money at once to be able to fund that thing that you want to do. Yep. Okay. So don't forget, we have the bootcamp coming up and we can, we actually are going to have a day in there where it's coffee and chat. So any time, any things that are coming up as you're listening to this podcast, these podcasts coming up going into December, you could bring those questions because we're going to have a coffee and chat session during the bootcamp, which is exciting. We're also going to have a chance for you to submit your budget and you may get chosen to be able for us to be able to do your budget.

16:29We'll whitewash it obviously and remove any personal information. But yeah, it's just going to be a chance to get coached by us. Yep. So go to budgetbesties.com forward slash bootcamp for that. And then today, just remember, we were just trying to explain the difference between emergency fund and savings bucket. What order you should do both. Yeah. And we want you to fund that mini emergency fund. We want you to start your non-negotiable buckets. We want you to pay off debt, build that bigger fund, and then build a bigger emergency fund, and then have a dreamy savings bucket session and figure out all the fun things that you want to do now.

16:58Yeah. So we hope this helped and we'll see you next time. If you're tired of feeling like your finances are all over the place and you're ready for a simple set it and forget it way to budget, we have something special for you. Watch our Automate Your Budget Masterclass at budgetbesties.com forward slash automate. We'll show you step-by-step how to finally organize your money, how to set up your accounts, and put your budget on autopilot so your bills, saving, and spending run like clockwork. Imagine less stress, more savings, and the freedom to spend money without having to track every dollar or babysit your bank account.

17:32Go to budgetbesties.com forward slash automate to start today.