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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