3 Ways an Emergency Fund Audit Can Keep Your Future Safe
Written by
Laura Bogart
Edited by
Kristen Mae
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An emergency fund is commonly thought of as your “in case of emergency, break glass” money. Unfortunately, it can be all too tempting to treat your emergency fund as if it truly is under glass; you add money to it when you can, but you never really think about it again.
According to Mckenzie Mack, a social media star with expertise in personal finance, if you don’t take stock of your emergency fund regularly, you could be shortchanging yourself — quite literally. Mack advocates for a financial audit of your emergency fund to see where you could improve your savings.
In a TikTok video, she outlines why conducting an emergency fund audit is essential to your financial future.
An Audit Helps You Look at Your Spending as a Whole
One of the most important aspects of Mack’s emergency fund audit involves recalibrating all of her expenses and determining whether she’s comfortable with where she stands. At the time she recorded her video, her emergency fund sat at six months of expenses — a total of $28,000.
Mack broke down everything she’d need to pay for should she be confronted with a sudden crisis, like a job loss for six months, from baseline essentials like rent, utilities, and groceries to other core parts of her life, such as pet care. To avoid neglecting her student loan debt, she factored loan payments into her spending as well.
Her breakdown was realistic, also including a modest budget for eating out, coffee, and fun, to ensure that she had everything she might conceivably spend money on, even while living on a tighter budget.
Notably, she also included $500 to cover health insurance premiums if she were to lose her employer-sponsored plan.
An Audit Can Help You Make Necessary Updates
In the process of outlining her own expenses, Mack realized that by refinancing one of her student loans, she’d actually lowered her payment from $728.21 to $482.24, altering the total amount she had to pay in student loans every month.
In the course of your own financial audit, you might realize you hadn’t factored in rent increases, paying off a credit card, or entering a utilities budgeting program. On a happier note, if you’ve added a furry, feathered, or even scaly friend to your household, you’ll need to add pet-related expenses to your emergency fund.
Perhaps you’ve received a raise or paid down a debt or a loan, allowing you to add more to your emergency fund. Without performing the inventory, this extra money might have essentially slipped into the ether.
When Mack performed her audit, she realized that her emergency fund budget would actually take her to about $25,000 that year.
An Audit Helps You Meet the Financial Moment
Though she’d reduced her loan payments, Mack was still anxious about where the economy may be headed and particularly concerned about the future. After taking stock of her emergency fund, she decided she’d rather have more money back under the glass that she could break if things went south.
“Full transparency, I’m feeling a little bit more financially anxious with the future, so I’m going to increase this to a 12-month emergency fund,” she said. “I think that would make me more comfortable, given the state of the job market right now.”
Going through her emergency fund allowed Mack to get ahead of her fears by vowing to add more to her fund so that it would cover her for a longer period.
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