Drawing from the Emergency Fund

I had the interesting experience of having to use my emergency fund in a way I had never intended on using it. To supplement a delay in my paycheck for a few days.

Companies nationwide had the unfortunate experience of dealing with Inuit’s direct deposit servers dropping the day of massive payroll processing (first of June) due to some sort of upgrade. This was a -massive- outage with a very large PR nightmare for Intuit considering the amount of paychecks they process as a whole (likely millions?).

My company happened to be one of them, and though they could still process paper checks, I use online banking only so a paper check would take a least a week to process on its own. The resolution I decided on was to have my company overnight a check to my bank with a letter explaining the situation and ask them to process it right away. My bank complied and my paycheck was processed a few days late, as opposed to a week and a half.

I learned some valuable lessons and even some positive insight from the experience, however.

1. Having an emergency fund meant that I was going to be okay, even if I had a week or more delay of my paycheck. Sure emergency funds are great for things like the hot water heater going up, or having 6-months worth of expenses should you lose your job. But it’s rare that I hear of using them because your paycheck may be several days late.

2. I pay all of my bills at least a week or two early (sometimes more), meaning I had very little immediate expenses. In fact, the only bill I paid was my electricity, some groceries, and gas for my car. Everything else could wait a couple weeks because I’ve programmed myself to pay my bills early, thus allowing some lee-way should something like this happen.

Because I pay my bills early, I did not have to worry about any late fees.

3. What would something like this mean for people who literally live paycheck to paycheck? How devastating would this be for someone who has to wait till last minute to pay most things because of how tight their finances are? I can’t imagine the amount of panic many people felt when they were told they may not be getting paid. I remember the panic a lot of military felt when they were told the Government might be shutting down and their paychecks may be delayed for an undetermined amount of time.

4. The delay did not throw off my plans for the weekend, like grocery shopping, because I had the funds necessary to continue on with my routine. Naturally if I had lost my job things would be in more of an uproar, but this was a temporary hiccup that actually had little to no impact on my financial status at all.

The experience alone really makes me appreciate even the temporary uses of an emergency fund, as well as the benefits of being diligent about paying bills early.

Would you be financially stable if your paycheck was delayed a few days or a week? Or would it be temporarily devastating to your financial status?

Crystal Groves is the creator of MoneyDrain.net, a site about financial fails and successes. Crystal is a web developer and musician from Gettysburg who took on a passion for financial responsibility in order to take care of her disabled father.

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9 comments

  • My old company screwed up my paycheck just about every week. But I live on last month’s income always. So I actually don’t need my paychecks til the end of the month. So that got me through… but jeeze… I would have had to find a new job if I had been living paycheck to paycheck.

  • Good Plan B! Your bank should have given you immediate credit. Payroll checks from a service is similar to cashiers checks. The money has to be there before issuing the check.

  • Yes, but I would hope whomever messed up getting me my paycheck would offer to cover any expense incurred during the lack of funds.

  • Thanks for the comments all :)

    @Ashley – I like the idea of living off last months pay instead of next months pay. That’s a good plan to have, I may have to try it myself.

    @Krantcents – Thanks, I’m glad my bank was willing to comply :)

    @Jenna – I don’t think Intuit is planning to do anything about it because paper checks could still be processed. It’s just an inconvenience for us direct deposit folks.

  • Wow. Never would have thought of an issue with that. I have direct deposit and have used it for over a decade and never had a problem. All the more reason to get serious about some emergency funds.

  • That is crazy that they could mess something like payroll checks up. But that is why you keep an emergency fund, just in case.

  • ib

    We also live on last month’s income. This way, if there is a major change in income, then there is time to change your spending behavior before it becomes a problem.

    We also put everything on our Mastercard (cash back). This buys us an extra 1/2 a month or more of the grace period. We always pay our card in full a few days before it is due.

    So I guess in essence we are 1.5 month ahead of our actual expenses.

    It took us a year to be able to get to this point. It meant we had to come up with an extra month of income to be able to start the cycle. This is separate from our emergency fund.

  • me

    wow.. i guessi am the only one with emergency fund! I live paycheck to paycheck, and work for a huge corp. that shorts my paychecks every week.. which is why i live paycheck to paycheck. I’m never in a position to “get ahead”.. although in September when I am paid 3 times I should make it to that point as I will be ahead one full paycheck. With my couponing, I can get ahead about 3-4 weeks towards the end of the year.It’s rough, that’s for sure. . and climbing back from nothing (I worked part time with summers off at a school while I was in school myself) to finally getting on track has been one heck of a journey and glad to almost be where I need to be like the rest of you :)

    • There are actually a lot of people without emergency funds, but when you have one it makes a huge difference. It’s worth building, even if you have to sell stuff or take on an extra job to do it. Hopefully you can get the shorted paychecks straightened out.