But that $100 gap assumes I use all of my liquid savings and 529 balance. In other words, my checking account would be empty, I'd have no non-retirement savings and no buffer and I'd be about $100 short just before graduation. I'm actually really happy with that answer right now; it's way closer than I thought I would get when I originally set my goal. However, now I'm wondering how close I can actually cut it.
I've never had a true emergency fund, per se, but I've always had enough liquid savings on hand to cover a new (to me) car, a year's worth of living expenses or more. Now all of that has been earmarked for tuition, living expenses and so on and will very rapidly disappear. This year I'm less concerned for; I have enough in cash right now to pay all my living expenses plus a six-month buffer even after paying for my tuition, fees and supplies. That buffer will, hopefully, grow through the end of this summer as I continue to work and be paid.
Next year, however, is a different story. From my best estimates, I'll pay my business school bills and have just enough left over to cover expected living expenses and not a dime more. No emergency fund, no slush fund of savings, nothing. So I'm wondering how I should approach this and thought it would be better to come up with some strategies now, while I still have savings and options, rather than later when I'm already down to minimal to meet expenses.
I do have a few options, but I'm not sure which is best:
- Wing it - It's in the future, I have family, friends and a SO who can help me out and who knows what will happen between now and then (This option terrifies me more than a little. Neurotic planner, who me?)
- Loans - I could accept enough loans to constitute an acceptable emergency fund but not take distributions unless I'm in a real bind.
- Roth IRA - I have about two years worth of living expenses in a roth IRA that I'm currently planning not to touch. I'd like to avoid dipping into them since you can't put the contributions back later.
- Something else? - I currently have no plans to work, I could set up a formal loan arrangement with an interest rate with my SO, or some other plan. You guys have any ideas?
Of course I also need to figure out what size of emergency fund is appropriate for my situation. Here are some factors:
- I have good health insurance
- I'm not planning on making money while in school, though I might take a job if it was a good fit
- I won't have dental dental insurance
- My SO will continue to work and has a separate and large savings slush fund, but we maintain separate finances and I would like to do this on my own.
- Cash on hand when I apply for financial aid again this spring might ding my financial aid for next year
- My fixed costs are very low once the business school bills are paid. Rent is $400 plus utilities and groceries are $12.50 a week for my share and that's about it. (Thank you mom and dad for the family cell phone plan and car insurance.) Realistically irregular expenses and utilities will keep my minimum spending above $500 a month but I might be able to get down to $600 in a crunch situation.