Katie’s Financial Wellness Tips: Emergency Funds

When  you are swimming in debt, and have creditors calling you every 30 minutes, the *last* thing you think of is putting away
$1000 of your hard earned money to just *sit there* in the bank! There are 100 other places you could think to spend that money (but only a couple should you actually spend at while in debt. Fuddruckers is not one of them.)
What happens when your tires are so bald that the shop won’t even rotate them for you when you get your oil changed?
What happens when your washing machine breaks mid-way through the wash cycle of your cloth diapers?
What happens when your garage door spring breaks?


No. If you are serious about getting out of debt (or at the very least, not adding to it), you need to stop borrowing money!
 But life happens, right? Washing machines break, and tires go bald. Typically, that would completely derail your budget, especially if you had a “zero sum budget” (more on that in another lesson). But not if you had an Emergency Fund!
I speak from experience. All of the above “emergencies” happened to us while we were getting out of debt and had already closed all of our credit card crutch accounts. There was no going back! When our tires needed replacing 2 weeks before Christmas, and we came to find out the tires could only be specialty tires, we wrote a check for $697. Two weeks before Christmas. And didn’t cry.
When our washing machine broke mid-cycle (3 times so far. I’ll never buy an LG appliance again), we wrote a check.
When the garage door spring broke (our main method of entry to our house), I wrote a check.
Those emergencies never derailed us. If anything, it kept us motivated to keep plugging along because it put even more trust in the program we were following!
We have been asked, “what happens if you have an emergency that costs more than $1000?”
For one thing, in the 2+ years we were paying of debt, that didn’t happen to us. However, I could imagine a situation that it could have happened, such as our dog having to have surgery. Again. The last surgery cost $1,200, but had it happened while we were in this phase of our indebtedness, we would have only had to have found $200 instead of $1,200!
Another thing, we have really good insurance (for us, not the dogs. That stuff is a rip off), so massive medical bills aren’t high on our “emergencies” list.
I know it’s scary to put money away just to sit there. But consider yourself one of the lucky ones if you don’t have to use it!
What’s an emergency you charged (and accrued interest on) that would have been covered with your Emergency Fund?

6 thoughts on “Katie’s Financial Wellness Tips: Emergency Funds

  1. Pingback: Katie’s Financial Wellness Tips: The Food Budget | My Daily Bread Crumbs

    • Refunding the emergency fund went to the top of the priority list. It didn’t hurt our Christmas to do that because we had $600 saved for Christmas gifts! We used to have to wait until Dec. 10th to do ANY shopping, because there are a bunch of holidays in November so the check is big. So, when we got that big check, instead of buying gifts, we refunded the emergency fund.

  2. Pingback: Katie’s Financial Wellness Tips: The Envelope System | My Daily Bread Crumbs

  3. I was in a car accident and needed to fork out the $1000 deductible for it to be fixed and for my insurance to cover the cost of a rental car….. Our auto insurance deductible’s are now $500. LOL

  4. We have several savings accts. One is our money market acct. It typically has between $3-5K in it. When we sold our house in WA in 2009, we put all the money into a CD so we could purchase another house without having to take out a huge loan and we will NOT be touching it until we buy a house. Another one is our ING acct that has more money in it than the MM. It has a better interest rate than any of our savings accounts or CDs. We have a credit card we use and pay off each month. It is linked to a 529 acct with fidelity and we get a percentage back towards the kids college education.

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