Beating Broke

Personal Finance from the Broke Perspective

Murphy Strikes Again

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In the midst of spending 5 straight days remodeling our kitchen, our good friend Murphy’s Law decided to show up.  My father came over for the long weekend and helped.  Without him, the remodel would have probably been a disaster.  But, that’s not where Murphy comes into play.  One evening, after we had supper, we made our way to a local park so that the kids could run around and get worn out a bit.

As we were walking back to our car, we noticed a pretty good sized pool of liquid under the car.  Sure enough, it was oil.  It doesn’t take a mechanic to know that a pool of oil under your car is not a good thing.  Not even a little bit.  I got the car home, and parked it until Monday, when I could call the mechanic and have them take a look at it.

Luckily, when they called back with their diagnosis, it wasn’t a hugely serious problem.  A minor seal had broken and needed replacing.  The seal  itself is a $16 part.  The labor to replace it is a bit more.  We had been envisioning a bill in the $1000 range, but instead, got a bill in the $150 range.  Even so, that’s a pretty big unexpected expense for us.  A budget buster on most months.  Luckily again, we have our Murphy thwarting emergency fund and our remaining tax refund, so either case would have been handle-able.

Unfortunately, the extra expense will likely have to come from the remaining tax refund.  It’s good that we still had the money hanging around, but using it for the car repair will mean that we have to wait a few months for the new couch that we had planned on getting.  We do have a fancy new remodeled kitchen though!

Once again, we’ve been reminded how the stress of a Murphy’s Law moment is lessened by having an emergency fund set up.  If the repair on the car had been more expensive, or we had needed a new engine (or a new car), we would have had that $1000 sitting there to help with the costs.  It wouldn’t have covered the whole thing, but would have made a serious dent in the repairs.  Get yourself an emergency fund!  It will pay for itself in peace of mind.

Realized Benefits of Emergency Funds

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Here and on other PF blogs, you’ll hear us all talking about the need for a well stocked emergency fund.  And, unless you have one, you likely don’t know that we aren’t just saying that because we think we should.  They really do have the benefits that we claim they do.  These last couple of weeks, my wife and I realized those benefits.

Early on March 26th, my then pregnant wife told me that I should probably stay home from work as it was appearing very likely that we would be having a baby that day.  Less than two hours later, we were checking in to the hospital to do just that.  If you’ve been there, I don’t have to tell you that it was incredibly exciting.

The excitement waned as we waited for the labor to progress and then quickly disappeared altogether when the baby began having decelerations in it’s heart rate.  The doctor began making preparations and the birth was expedited.  Rather than wait for the labor to progress as it would normally, my wife was instructed to push with all she had to get that baby out.  Quickly afterwards, the baby (a girl!) was born, and just as quickly was taken to a warming table to be intubated and have her lungs and stomach suctioned and checked.

It turns out that sometime in the weeks leading up to her birth, she had *ahem* pooed in her amniotic sac.  To the medical world, it’s called Meconium.  And it’s pretty bad.  It affects the lungs in that it acts as a stopper for the little sacs that do the oxygen intake.  It also acts as an irritant to the lungs that can lead to infections.  It can be very serious, and can take days, or weeks, or months to completely clear out.

In our case, luckily or not, our little girl was able to kick it in a week.  Pretty average recovery time we’re told.  Now, she’s home and all is well.  There won’t be any lasting effects and we shouldn’t be able to tell the difference.

calculator stethoscopeHere’s where the benefits of an emergency fund come in.  For that week that our little girl was in the hospital, the last thing we wanted to think about was bills, work, or anything not related to the well-being of that precious baby.  We had friends watch our dogs, and my wife’s mother came up for a couple of days to watch our son.  And we spent as much time as we could watching our little girl fight the fight in an incubator.

We didn’t have time to balance our check book, or check our budget to make sure we were within bounds on something.  And now that it’s all over, I can honestly say that if we hadn’t had an emergency fund, it would have been much, much worse.

One of the touted benefits of an emergency fund is the peace of mind that it affords you.  When you know that you have that money to fall back on in an emergency, your mind is free to worry about the things that it should be.  In this case, it was our daughter.  Maybe it would be the car you just wrecked or the house that just burned down.  No matter what the emergency is, you know that you’ve got that extra cushion of money to help pay any bills or expenses that might come up.

I cannot tell you how wonderful it was to not have to worry about that during the week that she was in the hospital.  We certainly didn’t expect to have any problems, but we did.  You may not expect any problems, but they can happen.  If you’ve been putting off the funding of your own emergency fund, don’t wait any longer.  We’re glad we didn’t.  You never know when you’ll need it.

Photo Credit: forwardcom @ sxc.hu

Beating Broke Rules: Emergency Fund

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If I could use only one word to describe my thoughts on this it would be the word yes.  I went the first 26 years of my life without an emergency fund and I’ll never go another day without one.

The purpose of an emergency fund is to give you available funds in case of an emergency.  Your car breaks down and needs repair.  You fall and break an arm and have to take some unpaid leave.  Whatever the emergency is, your fund is there to see you through it.  It’s a great thing, and can take an immense weight off of your mind that you didn’t even know was there.

So where do you put your emergency fund?  A fluid account that you have nearly immediate access to.  I prefer to have it in a secondary account that is separate from my everyday account because that makes it that much harder to spend on silly non-emergencies, but where it’s still available if I need it for an emergency.  At the moment, I keep my e-fund(my pet name for it) in an Ally Bank interest checking account.  The interest rate is consistently in the top 10 or so and the service has been superb.

How much do you put in it?  Ideally, you’ll keep 3-6 months of expenses in your emergency savings.  If you’re just starting out with your debt plan, try for something between $1000 and 1 month of expenses.

Make your emergency savings a priority.  Until your reach your $1000 balance goal, you should be paying as much as you can into it.  The peace of mind that you’ll get by having the account is well worth the extra interest you’ll pay on your debt while your building it.