You’re Going to Need A LOT More Emergency Cash – Bad Things Will Happen!

emergency cashIf you’re one of these people who walk around in a cloud of optimism thinking that nothing bad will ever happen to them, and that a safety net of $1,000 or so should suffice, I’ve got some bad news for you…

You’re going to need A LOT more emergency cash.   And I mean A LOT more than you think!

Let me tell you what happened to us over the Christmas break.

It’s a pretty funny story – funny for you to hear, but not funny to me at the time.

All I can say is start saving!  You never know when something like this is going to happen.  But its inevitable that it will!

Here’s my story…


What Happened?

On the last day of work before our official Christmas break started, I drove my wife’s GMC and noticed some pretty weird things going on.  There was a faint but pungent burning smell in the cabin.  When I got home at night, I also noticed some steam coming up from the hood.

That can’t be good!

So the next day we took it into a dealer to have it looked at.  It turns out the problem was pretty major.  Apparently oil and coolant were leaking into the cylinder heads and causing the engine to misfire.

The solution: Replace the whole front engine cover!  A quick look on the Internet and I found the part alone is over $900!

On top of that:

  • The O2 sensor was malfunctioning.
  • They also noticed that the brake pads were really worn.  (They also showed us, and they were getting pretty bad).

Altogether the cost for repairs: $2,200!

Fortunately the dealership was able to work out a prorated figure since we are very close to still being covered by our drive-train warranty.  So the final cost will be closer to $1,100.

But still!  A hit of $1,100 to our emergency fund is no joke!


Not Long After That:

About a day before we were supposed to get our GMC back, I started up my other car only to discover that the blower motor for the HVAC was not working.  No heat for me!

I was hoping that this one would just be an inexpensive fuse or bad resistor.

No – why would it?

The whole blower motor had to be replaced!

Final cost? Another $300.


Kicking Me While I’m Down:

Oh yeah, we’re not done.

So while all this business with car repairs is going on, we were hit with a raging winter storm that knocked out power for most of the people in our area.

We started to wait it out, but after about a day we became very concerned about pipes freezing, food going bad, etc.  So to keep our house from running into any problems, we found ourselves with no choice but to rush out and purchase a gas-powered generator.

The cost: Another $800!

In case you’re keeping track, that’s $2,200 in emergency cash straight out of pocket so far ….


A Bad Year of Very Expensive Car Repairs:

emergency cash2013 was not a very good time for me and my automobiles.

In case you missed these prior disasters:

  • The sunroof had a slow leaked where rain water eventually short-circuited our entire dashboard!  $2,200
  • Almost right after the sunroof / dashboard thing was fixed, both my wife’s vehicle’s back tires blew out.  It was pretty close to being time to replace all of them anyways, so we ended up getting 4 new tires for $1,200.
  • Just a few months ago we noticed a pink puddle on the floor on our garage.  It turns out that it was a bad water pump that needed to be fixed.  $400.
  • And now this issue with the front engine cover.  $1,100

Altogether, that’s a total loss of $6,100 in emergencies over the past year!

Holy crap!  That’s a lot of money!  We could have taken two full exotic trips to Mexico for that price.


How Much Emergency Cash Do You Think You Need?

After hearing about my bad luck, how do YOU feel about the integrity of your own emergency fund?  Could you have weathered this storm of “surprises” without going into debt or using credit cards?

If your answer is no, then perhaps you have some planning to do.

So often we hear about financial advisers recommending that we have 3 to 6 times your monthly living expenses that it unfortunately becomes passé going in one ear and out the other.

I’ve noticed a lot of bloggers recommending that all you need is $1,000 (which I believe originated from Dave Ramsey).  However, put yourself in my shoes.  How long would $1,000 in emergency money have held up?

That’s right – not long at all…

But what other alternatives do you have?  Get yourself into credit card debt?  Payday loans?

Unfortunately even though it can be a hard pill to swallow, coming up with 3 to 6 times their monthly living expenses is probably just about where you want to be.  This is a pretty universal target that almost all working individuals can identify with.  Even if you receive irregular income as freelancer or contractor, there are still plenty of good ways to calculate your income so that you can estimate what this target should be.

But nonetheless coming up with a chunk of money that size can be a pretty challenging task.  So where are you supposed to find that many funds to build up your emergency money?  Try:

  • Income tax refund
  • Annual windfalls / bonuses / profit sharing
  • Diverting the percentage of your raise from work into a separate savings account
  • Credit card bonuses
  • Creating automatic monthly withdraws from your checking account (basically treating your contribution to your savings like any other bill)
  • Taking on small passive income or side jobs
  • Using the dividends, interest, or capital gains from your non-retirement investments
  • Using your Roth IRA.  (However be forewarned that this can have serious implications on your retirement planning).


Whether you’re ready for it or not, trouble is coming for you!

I didn’t count on any of this bad stuff happening to us last year.  I’m also hoping that no more bad things happen to us this year.  (How can it when it feels like we just about fixed everything?)

But I KNOW bad things will happen.  It’s inevitable.  And to protect ourselves, we’re going to need to make sure we’ve got plenty of emergency cash on the side ready to go.

Will you?


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  1. says

    Sorry about all the bad news. But I’m right there with you buddy. The no e-fund people will never make sense to me. Unless you’ve simply got enough money that you could handle all of your responsibilities, stay on track for your long-term goals, AND handle these kinds of big emergency expenses (and really, you could see much bigger) DURING a market downturn, then yes you need an emergency fund. And yes, it should be big. And no, I could really care less about how much interest it’s (not) earning.
    Matt Becker recently posted..How to Choose the Right Type of Life InsuranceMy Profile

    • says

      I used to care and even obsess about how much interest I was earning on my emergency cash. I’d always justify investing it over keeping it in cash. But then I had a few years similar to this one that really stung my finances hard! Now I know better.

    • says

      I think this is totally how people get themselves into trouble with credit card debt. When you’re unprepared and in need of money quick, the sharks will swim around and get you!

  2. says

    Everything comes in sets of three huh? I completely agree with you $1,000 in an emergency fund is not enough at all!! I’m fairly close to having my emergency fund at 10k and I still feel like it could be a little higher. I agree with Holly, I’d rather be safe than sorry.

    • says

      The only comforting thing about the “bad things in 3’s” is that when the third bad thing happened, we knew that that was the end of it! … or at least we hoped it was … :)

  3. says

    We had an issue with our roof leaking last year and opted to get the whole thing replaced since they needed to tear up close to half of it anyways to replace the plywood. The other roofer (who worked on the roof before we bought the house) did such a terrible job we didn’t want to take the chance.
    Jon @ MoneySmartGuides recently posted..How To Save MoneyMy Profile

    • says

      When it comes to house and car repairs, you really do pay for what you get. I can identify with your questionable roofer and not wanting to go with him again. I’ve worked with a few places that claimed to fix my car, but I swear they made it worse!

    • says

      Cars are the worst!

      Good point about debt. Even if you do have outstanding loans or debt to pay off, you should still have some kind of emergency fund. Without it, all you’re doing is gambling that you won’t get yourself even further into high rate debt.

    • says

      I used to think those 3-6 month targets were just some kind of “media scare tactic” in case you lost your job or something tragic like that. Now I can totally identify with it.

  4. says

    I’m sorry all that happened! It does seem like the universe wants to kick you while you’re down. I agree that I do NOT think 1k is enough. I want to have at least 15k in mine because I’m also a freelancer with unsteady income. For me it’s just way to stressful not to have a lot in that account.

  5. says

    I would NEVER feel comfortable with $1,000 in my Emergency Fund. That $1,000 number from Dave Ramsey is for people paying off debt and is all about opportunity cost rather than the reality of a lot of people’s situations. I am currently at $5,600, and am aiming for $6,000 this year with an ultimate goal of $10,000 when my debt is paid off.
    Alicia recently posted..Becoming my Personal Sous-Chef.My Profile

    • says

      $1K is okay when you’re just starting out in personal finance. But I think a lot of people will find that at some point when they want to get real about their finances they’ve got to be ready to handle a whole lot more. $10K is a very respectable sum of emergency cash – nice target!

    • says

      Who’s this Money Manifesto guy?? Oh, hi Lance! I had rescue your comment from the moderation folder.

      We’ll be replacing our cash funds with our income tax refund and upcoming profit sharing earnings.

    • says

      That’s absoutely right! You can’t plan for everything, so all you can really do is just have a lot of cash ready to go for when you least expect it.

  6. says

    Cars are such a PITA!!! I hope in the near future it becomes much less common to own individual cars. The closest we’ve come to using our EF has been for car repairs, but we have a separate savings fund for them.

    • says

      Cars really are the worst. Honestly the longer I have them, the more the romance and awe wears off and I just look at them as a tool to get from A to B.

  7. says

    I always tell people that are STARTING to pay off debt to aim for that $1000 number, but you are right– you will eventually need to beef it up a bit to account for compounding emergencies..

    Medical bills can be even more of a pain than car repairs.. Trust me, that is what did us in long ago..
    jefferson recently posted..Paying Off Debt – The Definitive GuideMy Profile

  8. says

    We actually keep separate long term savings and emergency funds. 10‰ of all income goes into long term savings. 6 months expenses in the emergency fund.

    Emergency fund are for true emergencies, like losing your job, unexpected medical bills, etc.

    Vacation, car repairs, home repairs, etc come from long term savings.
    Jack @ Enwealthen recently posted..2014 Financial Goals: Are Yours Smart?My Profile

  9. MJ says

    Sorry to hear about your bad luck with emergency expenses. I agree with you $1K is not enough. My husband and I have enough to cover 5 months of expenses if we BOTH lost our incomes. We’d last a lot longer in the event of a single job loss. In 2013, we were thankful to have our e-fund to cover an $8,200 special assessment to our condo building. We were given 6 weeks notice to pay in full. Except for the fact this sucked, we didn’t panic because we had the money.

  10. says

    One thing I’ve learned last year is that I should indeed add my savings for emergency. My youngest son was rushed to the hospital last year and we did ran out of budget for emergency. That is why this year, I’ll increase my savings on it to avoid that kind of problem again.

  11. says

    Ugh, when it rains, it pours. I’m glad you guys had the safety net to get through. I recently tapped my emergency fund to take advantage of a great job opportunity, but it makes me so anxious that it’s so low. I can’t wait to get my tax refund and dump it in there. I don’t actually think I’ll rest easy until I have at least 6 months of expenses saved up, although I prefer a year.

    • says

      That’s a smart move with the tax refund money. Usually I like to encourage people to have fun with their money, but unfortunately after a year like I had, better to be safe than sorry when it comes to having that emergency fund ready.

  12. Dianne says

    I totally agree! I listened to Dave Ramsey, socked away $1,000 in emergency savings, then started tackling my debt. I would have had my debt paid by this summer, but had massive plumbing repairs which damaged my foundation. $9,000! I had to throw it on the card. Now, I am wiser, and split my extra cash 50/50. Half to debt, and half to e-fund. I feel so much more secure.

  13. says

    You’re so right about building up some cash reserves. i’ve been sailing close to the wind for a long time, not having a lot in the way of cash for a rainy day.

    For my New Year’s resolution, I’ve started to put away $300 per month to a seperate account. It doesn’t sound like much, but if I’m disciplined, I’ll have $3,600 by the end of the year (as long as I don’t have any emergencies!! [knock on wood]).

    I plan to build it up to $10 – 20k over the next few years.


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