Emergency!!! What Do I Do Now?

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.

Unfriend Mr. & Mrs. Jones

In this world we live in today, with Facebook, Twitter and a host of other social media outlets, one of two things usually happens. Either someone wants to set the record for the number of friends they have or once they get to a point where they have a ton of friends, they start being selective about which friends they listen to or “follow.” It really is ok to unfriend someone who you no longer associate with.

When I was in so much debt that I was wondering if I was going to be able to keep my house (see the About page), I could care less about what other people had versus what I did not have. Sure, it bothered me when I would see people who seemed to have it all and I was struggling but I certainly did not care one bit if my house needed a minor repair. Instead, I was totally focused on making sure I had enough money to pay the mortgage and the rest of my pile of bills and late notices.

If I am saddled with too much debt, then I need to stop the bleeding first. Does it matter which kind of car I have if I cannot pay for it? In 2002, when I was newly divorced, I was driving a 1989 Ford Taurus station wagon. I was putting one quart of oil and two gallons of water in the car every day just to get back and forth to work. I had an eight mile commute each way. If I got stuck at a red light, I would either turn the car off or pull into a parking lot and shut it down. I tried my best to stay away from the downtown area where I would have to stop and go all the time with traffic lights or stop signs. Instead, I stayed on the highway to get back and forth to the store. You see, the radiator fan had gone out for the third time and had not been fixed. There were so many leaks in the seals that I would constantly be adding another layer of oil to the roads. I could not afford to buy another car. My accounts were frozen because of the divorce, and anyone I asked for a loan just laughed. Pretty humbling.

What is it about the Jones’ that gets to people so much? Are we afraid of looking “less than” if we do not have the latest gadget? When it comes to a choice between paying a bill and putting food on the table, I am going to eat first. Sure my credit score was around 350 or so but that happened during my marriage, not because of the things I had been doing since the divorce. No one in the house had a cell phone. We had Internet service but it was the $9.95 per month version and frankly, most of the time, it did not work like we wanted it to.

Seems our society is engrained in the idea that delayed gratification is for sissies. What I have learned over the years is that if we have just a little self-control, and can save those pennies like I mentioned in the post “Can You Spare Some Change,” then we will be able to get the things that we want without having to go into massive amounts of debt. If you already have heaps of debt, then getting those things you want might take a little longer – but that is ok! Call me a sissy if you want. I can live with that.

Try it. Try not buying anything that is not a “need” until you have the cash to do it. You can ask my wife. Life is a whole lot nicer when you don’t have to go to the mailbox and pick up bills for stuff you bought three years ago. Today, we simply complain about having to throw away the junk mail.

Oh – remember that car I was talking about. After a year, even though I had to still take out a loan, I was able to buy a used 1999 Toyota Camry. I donated the station wagon to the high school and they beat the heck out of it for their homecoming rally that year. Oh, how I wish I had a picture of that one.

Have a great week.

Savings Tip #2 – Savings Through Checking

In my previous post, “Can You Spare Some Change,” I talked about saving your change when you use cash.

At one point in my life, I decided to only use my checking account to purchase anything or to pay bills. I went cashless. A few things happened because I decided to do this. The first was that I could only go places that would take a check. The second thing was that I was careful about what I was buying because I did not want to write countless numbers of checks for $5.00 or less. After all, I was paying for checks on top of it.

I also decided to start dropping the change on checks. What I mean by that is that every entry in my check register was rounded up to the next whole dollar. If you read my post, “Can You Spare Some Change?” you will recall what I did with change when I was only using cash. By rounding up to the next whole dollar, I was effectively doing the same thing with my checking account.

This method is a little strange though. For most of my life, people have told me about how I need to keep track of every cent in my checking account in case the bank has made a mistake or if someone had gotten ahold of my account information and was writing checks that I had not authorized.

This method will not work for everyone. If you are going to use this method, then you have to be able to take the time each day to update your information. If you can do this, then you will know exactly what the difference is between your check register and the amount that is actually in your account.

Within two months, you will more than likely have at least $10-20 extra in your checking account that is not accounted for in your register. If it is getting close to payday and my funds are running low, I can feel secure in the fact that there is extra money in there. I typically keep about $150.00 in the “slush fund” at any given time. I will talk about what to do with it next time.