Uh oh, I just blow away my emergency fund to fix my truck 
$970 was the total to fix it and get my truck back and running right. I’m thankful we had the $1000 emergency fund to handle Mr. Murphy today. During dinner my wife asked a very good question that I never thought of while building the emergency fund and setting up our debt repayment plan. The question was, “What do we do if the furnace breaks tomorrow and we don’t have that $1000 anymore?” I didn’t have an answer. I was stumped, the guy who reads about personal finance all day long didn’t have the answer. So I’m asking for your help dear reader. What would you do? How would you handle it?
Looking through my accounts, I’m sure I could piece together the money to fund the next emergency. I could take some money from my sinking utility fund that is growing at the moment. I could move some money from my long-term accounts, i.e. Insurance, Taxes, or Christmas. The money would only be moved for a very short period of time, because the emergency fund is now the first priority to fund. It’s like starting over with the baby step #1.
I could borrow from my 401K account. Nope sorry, I already did this for other stupid reasons. I can’t afford to pay that stupid tax again. I could borrow from a family member. I guess only in an extreme case could I consider that option. And of cause I could always pull out that “Emergency Credit Card.” I’m trying to get out of debt here, not start over again.
What am I missing? Are they any other ideas out there? Remember bad things tend to happen in threes, or at least that is what the old wives tail says.
Article by Jeff Kosola
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{ 16 comments… read them below or add one }
One option, depending on the emergency, might be to find a contractor that has payment options that aren’t traditional credit, such as payment plans. They might let you pay for the parts up front and bill you for the labor. This would allow you to spread the damage over more paychecks without dipping into credit.
Buy $30 worth of blankets!
No, seriously…if the account gets low I’d personally just fight like hell to pull things together and keep on track. If the furnace goes out start calling some buddies, neighbors, church, co-workers you might be surprised who knows what or who knows who. Pull money from Xmas, vacation, what ever you need to do to keep warm and keep fighting.
Glad you had the $970 – at least now you can keep those scrumptious pizzas & tip money moving – bust it bro! and by next Monday you’ll already be half way there!
Myself I give myself extra cushion by budgeting all of my extra debt payments for the month and keep gathering until about the 25th and then I send it off. In that case I fudge a bit and give myself some extra emergency room, that’s how I paid for the brakes in my truck without tapping my emergency fund. Yes I’d love to send it immediately when it’s available but since I’m not running any credit having a slightly more fluffy emergency fund is worth it.
I think in this instance I’d put it on the credit card. I’d be reluctant to raid other savings pots as it would ruin the overall ‘Zen’ of my financial plans. If the card was paid in full the next month, no harm done.
Hey Jeff,
The same thing happened to my wife and I when we first started. We saved $1,000 then her transmission went out – a $1,600 bingo that required not only all our EF, but also $600 on the dreaded credit card.
What did we do? We decided to make personal finance personal. We saved our $1,000 back up quickly with 100% of our available funds, then after the initial amount was there we scaled it back and created what I coined “The Balanced 75/25 Method” of debt reduction/EF savings.
We continued to put 25% of our available monthly monies into the EF until we had it funded to a level we felt more comfortable with… one month’s expenses worth.
To us, building our initial EF up to one months’ worth of expenses – THEN turning the gazelle intensity back on – just plain made sense. We feel better, and the gazelle has once again left the building… so things are good.
Think about it, it worked for us – do what works for you.
Another good idea. I try to do the same thing and send mine out on the 15th. I got caught in the empty space after my last check and before my next. I get paid on the 31st and 15th. I know the fund will be filled again very quickly, because all the pizza dough gets brought in weekly. I may have to adjust the timing of the dbet payments. I’m strongly thinking of going up to $2000 before any more debt payments. I guess you can never have enough cushion.
Thank you Paul
Love the idea of using the Friends and Family Network. You’re right. When people need electrical work or painting they call me. Someone in my vast family network would know somebody.
Thanks Vinny
That’s a good idea. I never thought of that. Oh yeah, that’s why I asked for help. Thanks alot PizzaGirl
Just keep plugging away. Better to use saved money than credit card loans at 20%. I say kudos that you had the money… so yeah – keep your head up!
Cheers
Matt Jabs´s last blog ..Tithing Our Time?
Very cool way to do it. We’ve been talking alot about different ways to dump the debt and still have a balanced life. I think you’ve just given me my topic for the dinner table tonight. How does the extra 10% factor into the equation? I’m giving 110% right now so the 75/25 method leaves an extra 10% on the table. Oh yeah I could put that into the EF and get there faster
Thanks a ton for the advice Matt.
You definitely should think about a separate savings for car maintenance. That is one cost that will never be over. I put aside a certain amount each month based on the average I will expect for the year. Anything except a car insurance deductible is not an ‘emergency’ it is necessary maintenance. And your savings should reflect this.
When we thought we werefacing a lay off. We fattened up our E-Fund until we felt more comfortable then went back to the debts. In our case $1000 wouldn’t have helped us too much if we lost a job.
I guess that’s why personal finance is personal – everybody has a different story.
BTW Jeff (pizza guy), please stop saying “dough” in your comments,I always wonder if you’re actualy talking about bringing home pizza dough
Hey Jeff, to quote Ned Flanders, that’s a dill of pickle you got there! Dictionary.com defines an “emergency” as “a sudden, urgent, usually unexpected occurrence or occasion requiring immediate action.” That sounds about right to be — the point is that emergencies come up, whether you’re ready for them or not. Fortunately, you were ready for the first one, but that’s not to say that another one might not just come up out of the blue. But because the emergency is something that “requires immediate action,” if I were in your shoes, I’d do whatever I had to do to pay it off. That might mean re-shuffling some accounts around or using a credit card and paying it off over time.
What I would suggest is keeping your fingers crossed that another emergency does not come up and, in the meantime, continuing to contribute to your emergency fund! You might want to consider keeping a bigger emergency fund to combat this very problem!
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Just when you think you’re back on the path, another freakin’ “emergency” happens. Yep, that truck is going to cost me another $650 to fix the heater actuator. The dealer is cutting me 25% deal on the labor because of all the problems I’ve had with them lately. I do have the cabbage to pay cash again so that’s great, but what a hit this is giving me. What’s that? Keep my head up. Ok, I got it – keep looking at the long term goal…
You put it perfectly.
I’ve budgeted a small amount to cover the maintenance, but I’m revisiting and modifying it. Thanks for the comment.
Your are correct. I was faced with another “Emergency” 4 days after I wrote the original post. The complete totals for the emergencies was $1675. I was forced to move some money around my different accounts. The good news is that I’m back up to my $1000 EF the bad news I couldn’t make any extra payments for the month. Oh well, I didn’t go into debt over it and I proves that knowing where your money is and being on top of your finances sure makes it easy to handle things like this.
I’m in the process of setting up the budget for next year and I’m adding another grand to the EM for this just like this. I believe the term is “go big or go home” so I think I’d better go big.
Take care, Jeff