If you think that having $1,000 or so in your emergency fund is going to cut it, think again! I’m normally not a huge promoter of this topic, but over the last 2 weeks, I’ve had to dip into my stash more than I’d like. And if I didn’t have access to emergency money, I’d be up a creek either paralyzing one of my investments or taking on unnecessary debt.
Here’s my story of what happened:
Car Repairs Are the Worst:
About two weeks ago, my wife called me to report she had noticed water on the floor of her passenger side when she returned to her car. It had been raining all day, and it seemed very odd that any water would have somehow found its way in. When she got home, we got out a flashlight and searched all around. I couldn’t figure out where the water had come from, so we decided we’d just watch it to see if it happens again.
A few days later, she went to start her car one morning and it was completely dead. We figured the battery must have finally met its end, and so I made an appointment with a local repair shop to check it out.
After $190 later, they were able to verify that the battery was in fact dead and it was changed out. But that was only the beginning. The car was still having problems. Big problems. The shop reported there were all kinds of electrical codes coming up in their system check, and quite honestly they were problems that were beyond them. I decided to take the car to a more expensive but more resourceful dealership service center.
They were able to figure it out, and it was bad … Apparently her sunroof had a small leak that was allowing rainwater to drain down into the frame. This was not only corroding electrical connectors, but it also eventually shorted out the entire dashboard. The total cost for the repairs: $1,850!!!
And if that’s not bad enough, the parts they needed wouldn’t be available for almost a week. As a dual working family, we are absolutely going to need our cars to get to work. Therefore, we had to rent a car for the week. At $30 per day, that’s another $210 in emergency expenses!
Total emergency cash needed: $2,250!!!!
This is Why You Need Emergency Money:
Fortunately we have a small stash of emergency money in our Ally savings account to handle situations such as this. But it still really stinks. That was probably the most amount of money I’ve ever paid for an unforeseen emergency situation with our cars. Normally I unfortunately expect every trip to the “stealer-ship” to be on the magnitude of $500 or so. Not 4 figures!!!
I cringe to think of what people who do not have an emergency fund do in these situations. The car was obviously dead without repairs, and after a lengthy discussion of exactly what parts were going to be changed out, there was no skimping out.
When this happens, what do other less prepared people do? Do they:
- Raid their taxable investments and suffer the short term losses?
- Raid their IRA and get hit with a penalty?
- Throw it on a credit card and pay it off with a Million % interest charge?
- Get a shady payday loan?
Each one of those is a pretty terrible option.
Debt is not option. You need to do everything you can to combat your debt.
I think the lesson learned here is clear: If you don’t have an emergency fund, you’re walking into battle without a shield. You need to have money set aside for things that you don’t anticipate. I would have never dreamed that my wife’s car not being able to start one day would cost so much to repair. This is just one example of something that you can’t necessarily plan for or know will happen in advance. As optimistic as you may be or as great of intentions as you may have for your money, you’ve got to be prepared to handle the expenses that come with a small mini-crisis.
Readers – What horror stories have you gone through where you needed your emergency money right away?
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JC @ Passive Income Pursuit says
I hate cars for that very reason. Usually the issue just kind of pops up and you need to be prepared for it. I save about $75 for car repairs every month and then dip into the emergency fund if more is needed. I think the first 2 options for less prepared people aren’t really done. If they don’t have an emergency fund they probably don’t have much for taxable investments or and IRA, so they are most likely putting it on a credit card. I’m a big advocate of having an emergency fund, although you can easily take it too an extreme. I don’t think you really need a full year’s worth of money saved up, but at least 3 months is a good amount to be at. We’re currently around 6 months and will probably stay there.
I agree. I think a lot of people probably go the credit card route and suck it up. I like your idea of putting aside $75 every month. You know that when it comes to cars you’re going to eventually spend it.
6 months worth of savings is pretty impressive. We are more like 3 months worth because I prefer to use the money towards our investment goals. But that will probably bite me someday.
John S @ Frugal Rules says
Wow, sorry to hear about the cost of the repairs MMD…that is a chunk of change. Car repairs are the worst as they always seem to find something else wrong. Like you said though, it’s a great reminder of the importance of having a decent sized E-Fund. Thankfully we’ve not had anything where we needed to raid it for so much. Of course, I am knocking on wood as I type this. 😉
I’ll be “knocking on wood” as well when our house hits the 20 year mark and we can expect things like the roof, water heater, and air conditioner to start going. That’s when I’ll really need that emergency fund to be fully stocked!
My Financial Independence Journey says
I am no stranger to stupid car repairs. They always seem to pop up at the worst time and cost an order of magnitude more than they should. I budget for them, but I still keep the emergency fund around in case I under budget or the repairs hit right after some other major purchase.
Why DO they always need to happen at the worst time? It’s never when I have extra money or when I don’t have other big purchases in mind. Nope – they are always on top of whatever else we’ve got going on.
UGH that really stinks! And this is why I’m very happy that W now works at a car dealership because we can get cars, repairs and maintenance for very cheaply.
That is the greatest hook-up you could ever ask for! I’d love to have access to a lifetime of car repair co-workers and tools to take care of business.
Just an FYI — you may want to search around on the internet a bit regarding leaking sunroofs. There are a number of cars that have had those problems, and cases/complaints have been brought which led to recalls and/or the manufacturers paying affected customers for repairs because they were actually caused by a design flaw. Indeed, your call may have been subject to a recall or otherwise should have had the problem fixed. Look around for a bit, and you may find you were entitled to have the manufacturer pay for that repair bill.
Thanks for the suggestion. Of course the “stealer-ship” didn’t have any recalls for our vehicle on file. But that doesn’t mean I can’t look around on the Internet for myself to see if there is anything out there or any discount.
[email protected] says
Absolutely true. This also highlight the importance of investing in good car insurance.
I really wish there was a way to get the car insurance to cover at least a portion of the costs, but I don’t think that is very likely.
Lance @ Money Life and More says
Luckily I haven’t had to raid my emergency fund yet! I’d say I’m in the minority, but I normally have a bit of cash outside my emergency fund that covers unexpected expenses that aren’t emergencies per se.
That’s good for you, Lance. If you don’t have to raid your funds, then keep it that way!
We needed an emergency fund a few years ago when our roof began leaking. Actually we should have saved up for a new roof, but that’s a different story.
It’s easy to think that money should be invested. But you’re glad that it’s there when you need it. Like life/health insurance.
My parents had to pay for a new roof last year. Now that is one major expense that I am NOT looking forward to …
S. B. says
A couple of months ago, I went out to drive to work on Monday morning. Car wouldn’t start. As it turns out, a squirrel had made a nest under the hood over the weekend and chewed through all the ignition wires, distributor cap, and many other items. Repair cost = $650.
No matter how much you plan, you cannot account for crazy stuff like that. You just need to have adequate liquidity for the “unknown unknowns”.
That’s kind of a funny story (but not funny that it cost you $650 to repair). I had something similar happen. My cabin air filter was looking a little bit shabby even though I had just replaced it not that long ago. As it turns out, we found mice chew marks all along the edges meaning that they were probably sleeping in my engine during the weekend when I don’t use my work car. I can easily see how that could turn into a costly disaster very quickly!
Budget and the Beach says
My car is also the biggest expense I’ve had recently. 3k in repairs. I feel your pain!
That STINKS! BTW – What did they repair for $3K? That’s an awful lot of new parts and man hours …
Shawn James @ PipsToday says
Yes, Good Car insurances are best option, if you do not like so you can search the internet for the main parts you will need. Here you can get many places and search for promo codes as well to get free shipping and more savings off the price. Buy the parts yourself since you can usually save an average of 50% more than repair shop prices. Emergency money always helpful for any situation. For emergency funds, we have save 15% saving each month.
It would be very helpful and cheaper to buy the parts yourself. However, I don’t think that is always a luxury we can afford when the car literally dies and you have no clue what the problem is. Dealerships know that you are stuck, and that is how they can command such high prices.
[email protected] says
We just took a $1300 hit for an emergency room visit. We had to dip into our HSA that we’ve been saving up for braces, but thankful the money was there and we didn’t have to divert from somewhere else. A few years ago, it would have gone on the credit card. I think that’s what most people do, sadly.
Sadly, I agree that that’s what most people probably have to do. I’m glad we had some money set aside. It’s a bummer though because we were planning to use it for other things.
Maureen L. York says
Most experts agree that you should keep between three and six months worth of your living expenses set aside in your emergency fund. Depending on your specific situation and whether or not you have children, carry substantial debt and types of insurance coverage will determine what amount is best for you.
Scott @ Youthful Investor says
I hate car repairs and always feel like I am never prepared for them. Even with an emergency account set-up, it seems like they always come at the worst of times and are always something unexpected. I have thought about getting into a service like CAA or AAA to handle any of the easy and bothersome stuff, since I’m not the most car savvy.
I will say though, making friends with a local mechanic has been incredibly helpful though. Investing in that relationship has enabled me to get some parts cheaper and some service near cost. Plus, he’s incredibly honest with me and has many times refused to take payment for jobs.
If there are a few friends you want to strategically make, a carpenter, a plumber, and a mechanic are high on that list. Those guys will save your life right when you need it the most.
julien alexandre says
Yeap i think you are right to some extent that we always save some budget for our car repairs in case of emergency. But i think we should also search for the best repair service shop that provides quality work.. We do not get too much hurry in the emergency situation. A great tip is to ask your friends to give you recommendations about the quickest repair shop they use.
Charlice Eedu says
Thank you for this excellent article.
Actually, the article title is quite funny. I never knew there are stupid car repairs. Anyways…
While there are thousands of things you can do to save costs, one of the simplest way of saving money on your auto repair is to have a good maintenance culture.
Taking proper care of your car when it’s still in good working condition will ensure that it lasts longer. And it’s understood that changing things like the transmission fluid at the appropriate time.
Instead of going to your local auto shop to change your oil, you can get yourself a high-quality synthetic oil and STP oil filter and change it yourself.
Not only will this cut your expenses, but it will also reduce the time wasted parading your local mechanic shop.