I wanted to talk about emergencies today because of something I recently went through and some things one of my daughters went through too.
Have you ever noticed that when things seem to be going pretty good, something always happens that attacks your finances? It seems that the more we put forth an effort to be responsible with our finances, the more things happen that seem to try and derail us. I have had those experiences with my faith as well.
The other day, I was getting ready to go out of town to visit some family. I had already noticed that I needed to replace the tires on the front of the car so I took the car to the shop to get them changed out. Well, it turned out that the back tires were in just as bad a shape as the front tires. Instead of changing two tires, I ended up changing all four of them. I had not planned on spending that much money on tires that day.
I am in a good position though. I have money in several different accounts and was able to move some money around and pay for four new tires without much issue.
My youngest daughter ran into a similar situation a few months ago. I’ve talked to all of my kids about putting some money back just in case something happens that they are not ready for. She actually took my advice and had been putting money away from the job she has. She was able to have $800.00 in repairs done to her car. Even though she was not happy that she was spending that money on her car, a few days later, she shared on Facebook with her friends how good it felt to know that she had the money there to take care of it.
I’ve told all of my kids that they should have $1000.00 in a bank account just in case something comes up. I’ve heard that from many sources. If you look up “emergency fund” on the Internet, you are sure to find thousands of results that say just that. The usual response from the kids to that is “that’s easy for you to say, you make a lot of money.” Well, I don’t really make a ton of money but it is something I feel strongly about. Instead of setting a goal like that, I suggested that they put $100.00 away for something unexpected. Hopefully, while they are gathering that money, nothing comes up that they need to address right away. Once they have that done, I tell them to slowly work that amount up until they get it to $500.00 and then to $1000.00.
When I first started putting money away like this, my initial goal was to get $200.00 put aside as soon as I could. It took a while, probably 2-3 months, but I was able to do it. If you can get $1000.00 put aside, that will cover most repairs to the things you have. Even if you have a house, $1000.00 will more than likely cover most repairs, from a broken window, to an air conditioner repair.
It does not matter how you start. It could be that once a week, you pack your lunch and take that money and put it aside. However you do it, by having that money available for those “oops” moments in our lives, you can pay cash for those repairs. After all, it is not a matter of “if” something is going to happen, it is a matter of “when” something will happen. The result of that kind of savings is that you don’t have to put the repair on a credit card. Any time you can avoid using a credit card, you are better off.
Saving $5.00 per week comes out to $260.00 in one year. That does not include the interest, however small that is, from the bank. $10.00 per week adds up to $520.00 in a year. Just keep in mind what the money is set aside for. It is not there to go out to dinner or buy those clothes that are on sale. It is for things that must be repaired or it causes hardship in your life. If you use some of it, then slowly build it back up.
With credit card interest at ridiculous levels, any chance you have to avoid them and pay cash for minor repairs, the closer you will get to eliminate any debt you have on credit cards.
Today, my “emergency fund” typically has about $3000.00 in it. Short of having to buy a new car, I have just about anything covered that could break. The tires did not really bother me. Replacing tires is a necessary part of owning a vehicle. It’s done, the car is in good shape, we are safe driving it and I do not owe anyone for getting the tires replaced. You can do this too.