Would you go on a spending fast with me?

There’s a lot of debate online as to whether an emergency fund is necessary, and if so, how much is sufficient. In Kenya, the first isn’t valid. We are in such an unpredictable economy, that an emergency fund should be compulsory. I believe you need at least 3 months living expenses set aside (separate from your savings and investment). 3 months is safe, 6 months is even better.  However, like so many of us, that knowledge hasn’t translated to actual results.

The last time I had an emergency fund was about 2 years ago, which I invested in my farming business about 3 months before I got an emergency, but alas! The money was gone, I had to dip into my savings, and even get into credit card debt because of it. I had been thinking of a way to rebuild that fund, without reducing my savings, and I didn’t have any ideas how to, until I came across this article, about a lady who went on a 1 year spending fast to pay off her debt.

Over a year, Anna Newell Jones only spent money on essentials, and used the savings to pay off $23,000 of credit card debt. She says it was tough, but definitely worth it, and she’s on course to buy a home.

I found her story impressive, and felt this is something I could do to build my emergency fund. I spend a lot of money on “wants” that I have converted into “needs”. Looking at this past week (the week after pay day), I can list at least 4 things I bought that I didn’t really need:

1. On Saturday 29th September, I was bored and was “craving” chicken. I ended up spending Kshs 700 on Indian food, no chicken
2. Sunday 30th September, the chicken craving persisted, and I spent Kshs 500 on half a chicken and fries. I ended up eating just a piece of the chicken, then the craving passed (I’m mostly vegetarian )
3. Tuesday 2nd of October, I bought some cute bedding I’d seen on a Facebook shop. A good deal for the quantity, but definitely not a need, I have 2 month’s supply of bed linen in my closet – Kshs 3,500
4. Tuesday 2nd of October I was working late and was feeling hungry. I could have chosen to go home (10 minute drive), have dinner then continue working, but I instead ordered a hot sub and Coke – Kshs 700. I went home shortly after I was done eating.

Listing this down scares me. Over a period of 5 days, I have spent Kshs 5,100 on wants. Of course this isn’t the pattern every week, but it is a pretty good picture of what happens. Come Sunday, I’m likely to eat fast food because after working out all week, I feel I “deserve” a treat – Kshs 700. Even if the weekly Sunday lunch is the only want I spend on for the rest of the month, I’ll still have spent close to Kshs 10,000 on things I don’t really need, and that’s just in one area.

Why not cut them out for 6 months to build an emergency fund? Of course I will need more than Kshs 10,000 a month to do this, but Kshs 60,000 is a pretty good start. In addition, I believe with this, I will slowly learn to differentiate wants from needs, a lesson most of us need to learn. Does food really make us happy? How about shoes?

I’d also like to invite you to join me, see if it changes your finances. My rules will be as follows:

• No clothes, shoes and jewelry purchase, but I’m allowed to replenish one brand of perfume if it runs out during the 6 months.
• No eating out, when out with friends I can have a drink. Definitely no fast food, no Coke.
• Commitment to vegetarian living for the period, so no chicken meals. A side benefit to this is I have more energy when I’m on a vegetarian diet, than when I consume meats. I also sleep better, and my skin looks great.
• Unless I get windfall income or extra income, I will not go on vacation or take road trips during this period.
• In the beginning of every month, I will be setting aside Kshs 10,000 in my savings account, and at the end of the month, any balance in my checking account goes into emergency fund savings.
• Once my monthly fuel allowance runs out, I walk to work, and take public transport. This is a tough one, so I will want to reduce on unnecessary travel over weekends.
• I’m allowed to splurge on Christmas day, but the money to do so will have to be from other sources, not the monthly 10,000 bob.
• The spending fast begins today 4th of October 2012, and ends on 4th of March 2013, after which I will publish the results on here.

Wish me luck!

Madame Noire