Emergency Saving Fund

As a private teacher you can imagine that my income is extremely irregular, but there are not that many things I could legally do on my own schedule and still be able to pay the bills. Don't get me wrong, I love teaching, but it isn't exactly easy. I have to know the grammar rules, be able to explain things and of course be willing to teach before my students start work, during the 2pm lunch, after they finish work, and of course be willing to carry a bag with 3-5 kilograms of stuff that I need for teaching since I don't have an office desk to lock things in or a company fridge to store my lunch.

Since I don't think that teaching English classes is something that I'll be able to enjoy or physically do for perhaps the next ten years, I need an exit strategy. Before I started my first investments this April (2012), I had to first fund an emergency fund in cash.  I did that in January and February before I even thought of trying to retire early or become financially independent years earlier than what is considered proper by most financial advice websites. At the time I thought, If I am going to invest as much as possible for my own condo or income fund, I need to have cash for anything unexpected since liquidating investments usually causes special fees. Liquidating investments may cause a loss. Also early liquidation of investments often means having to wait several days or months to get cash.

One final simple reason why an emergency fund is essential:
If I invest every extra peso for investments and I get sick or need money I'll have to borrow from that fund to get by until the next half of the month when I charge my students again. At that point I can put the money back into savings. Without special cash savings, I would either save less or eventually have a problem and need to borrow or put expenses on my credit card.

What isn't an emergency fund?  
An emergency fund isn't an investment that would require waiting a day or more to have the cash. If it is an emergency you need the money today!
An emergency fund isn't a credit card or other line of credit with a financial institution. You don't owe money on it since it is your savings in cash.

How much did I decide to save in my emergency fund?
there are many things to consider for how much money to keep in cash for emergencies. I decided to keep living expenses for 2 months in cash and 2 months expenses in a Certificate of Deposit for 90 days.  Four months of living expenses isn't a lot of money, but it should get me by until I'm able to liquidate future investments if I need it.

Lets say that I lose my classes so my income drops near zero. I'll have 2 months cash expenses to use while I look for more work or blog or do artwork or whatever. By the time that's gone, the CD should expire and I'll have that money available in cash.

If I don't have an emergency, I'll renew the CD for another 30 days. At least this way I'll earn some interest on the cash and still be covered for a few months.

Background for early retirement journey

Getting started for very early retirement or financial independence

Hello everyone! I'm almost 36 and I've lived in the Greater Mexico City area including one of the cheaper suburbs (big mistake)for almost 11 and a half years working as an English teacher. I went independent several years ago. I was saving money slowly and spent it all during the big 2009-2011 recession and thankfully have recovered.

First of all, I talk about numbers in Mexican Pesos. I probably make less than 1/5 the money than most of you do at your jobs even though I'm doing better right now than ever before in the last 11 years. Of course everything could change next month since I'm working on my own and my only "marketing" is asking students and friends to recommend me.

I also sell artwork online. I started at the end of 2007 and slowly growing, but that really doesn't pay for more than my internet connection most months.

Issues:

Rent is a big issue. I share a 3 bedroom apartment in a poor neighborhood 5 minute walk to the nearest subway station, but my roommates are not very stable and they could move out any month.

Transportation is a big problem. Mexico City has a lot of opportunities, but since it is one of the largest cities and metropolitan areas in the world it is very normal to spend an hour or more to go from one place to another. I don't give classes near home, but not very far either.

It takes me typically between 1 and 1.5 hours between classes or classes to home ( I teach at the student's residence typically their office)

I take the bus and/or subway to get around.

Food cost is a big issue when I have a busy schedule (3 classes a day is a lot when you consider distances and travel time). I don't have an office fridge to store food and since I don't have a car either I really don't have the desire to carry packed food along with my books, DVDs, and other teaching supplies.

I've been lurking for about a week since I found the site and many of the ideas clicked. I could never get excited about retiring when I'm too old to enjoy it (How many 60+ are really in excellent health? perhaps half?)

Goals:

I'd like to own a tiny condo near central mexico city so I can't get around well on the subway. A tiny apartment in a poor area starts at 600,000 pesos so by the time I've saved up it will probably cost at least 700,000. By tiny condo, I mean approx. 45 square meters in a building with dozens of poor neighbors.

Goal 2 is to alternatively buy a relatively large property near one of the smaller cites for country living (I miss gardening). It would probably be cheaper to start, but I'd spend more on transportation since I'd need a car to go to the closest city.

I've been thinking about getting 800 square meters near Cuautla which is about 3 hours away by bus. I'm guessing it would cost me about one million pesos for a property of that size and build a decent house and a small pool on it although it could be done in stages. (1 buy a property and get a wall around it. 2. get the pool hole dug. 3. get house foundation poured. 4. build the minimal house and get solar power and solar water heater installed. 4. expand enough to be comfortable.) If I go with this option I'd keep renting and working a room here and go there on the weekends at least until I'm financially independent.

Meanwhile I keep saving and waiting for the shoe to drop. I figure one day my students will get laid off or something else will occur so in any case I need to save for when there isn't demand for classes.

Right now I'm trying to figure out how much money I need to save to be able to take a withdrawal rate of 4% or be able to pay for either land or the tiny apartment. Do any readers have suggestions?  I've been modifying my Google Docs budget spreadsheet and including a page for net worth and trying to figure out how to get it to tell me how much I need based on average expenses and current savings. I think It would keep me motivated to see the numbers improve with a definite goal.