Comments on: Even a Small Emergency Fund Can Bail You Out http://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/ Eliminate Debt, Enjoy Life Wed, 08 Feb 2012 06:34:04 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Roundup and Link Love: Please No More Snow Edition 2010http://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-4481 Roundup and Link Love: Please No More Snow Edition 2010 Thu, 12 Aug 2010 02:42:59 +0000 http://www.moneyrelationship.com/?p=2216#comment-4481 [...] Even a Small Emergency Fund Can Bail You Out [...] [...] Even a Small Emergency Fund Can Bail You Out [...]

]]> By: Adamhttp://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-3689 Adam Wed, 03 Mar 2010 02:26:31 +0000 http://www.moneyrelationship.com/?p=2216#comment-3689 You know, I wanted to reply to you when I first read this but I got side tracked. My opinion is that the emergency fund helps you get acclimated to spending with cash and not credit. If you rely on you credit card for those emergencies, I think the term emergency may have a different meaning than if you have to use the cash to pay for it. I may be writing a post on this soon as this comment sparked my interest. You know, I wanted to reply to you when I first read this but I got side tracked.

My opinion is that the emergency fund helps you get acclimated to spending with cash and not credit. If you rely on you credit card for those emergencies, I think the term emergency may have a different meaning than if you have to use the cash to pay for it. I may be writing a post on this soon as this comment sparked my interest.

]]> By: Alicehttp://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-3645 Alice Sun, 14 Feb 2010 15:49:52 +0000 http://www.moneyrelationship.com/?p=2216#comment-3645 My emergency fund has saved me when my hours have been cut at work during slow season (January and February) as I work as a waitress. When I go to graduate school to improve my employment chances, my emergency fund will be there in case some unexpected expenses come up. Even though I am paying off debt, I sleep easier knowing I have SOME money in the bank since my income is so erratic. Yes I could send my $2k to my credit card but then I would lose sleep knowing that if I didn't make enough one month or had more expenses than usual I would have to use my credit card again. And I vowed to never charge anything again that I can't pay off straight away. My emergency fund has saved me when my hours have been cut at work during slow season (January and February) as I work as a waitress. When I go to graduate school to improve my employment chances, my emergency fund will be there in case some unexpected expenses come up. Even though I am paying off debt, I sleep easier knowing I have SOME money in the bank since my income is so erratic. Yes I could send my $2k to my credit card but then I would lose sleep knowing that if I didn’t make enough one month or had more expenses than usual I would have to use my credit card again. And I vowed to never charge anything again that I can’t pay off straight away.

]]> By: Kenhttp://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-3644 Ken Sat, 13 Feb 2010 22:31:15 +0000 http://www.moneyrelationship.com/?p=2216#comment-3644 I have 2 emergency funds, the first is for real 911 type emergencies, lose of employment, hurricane etc. My second emergency fund is what I refer to as my "What Life Throws At You" fund, auto or home repairs etc. Last Sunday my wife walked in the door and stated 'I think the water heater is leaking'. I checked it out and sure enough is was leaking from the bottom of the tank. Next day, I had a new water heater installed, paid cash !! No Pain, thanks to my ' What Life Throws At You' account. I have 2 emergency funds, the first is for real 911 type emergencies, lose of employment, hurricane etc.

My second emergency fund is what I refer to as my “What Life Throws At You” fund, auto or home repairs etc. Last Sunday my wife walked in the door and stated ‘I think the water heater is leaking’. I checked it out and sure enough is was leaking from the bottom of the tank. Next day, I had a new water heater installed, paid cash !! No Pain, thanks to my ‘ What Life Throws At You’ account.

]]> By: JMKhttp://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-3583 JMK Sat, 30 Jan 2010 21:36:01 +0000 http://www.moneyrelationship.com/?p=2216#comment-3583 I'm with you No Debt Guy. I currently don't have a designated emergency fund and don't intend to create one. Having said that I have to add that it probably makes a lot of sense in certain circumstances. If you live to the full limit of your income and have an unstable job situation, you should have several months of expenses set aside so an unexpect loss of income or large unforseeable expense doesn't cause a major problem. We have an enormous line of credit (set up when we were building our home and ordering materials). It sits with a zero balance and the rate is currently 2.5% should we need to use it. Our credit card is used for EVERYTHING possible and paid off WEEKLY when I balance up the actuals against the spending plan. I want every possible flight mile, and have never paid interest on the card. So on the one hand we have a lot of available credit should an expense come up which couldn't be covered with the cash in our account. On the other hand the biggest reason we don't bother with the "emergency" fund is that we intentionally cut our costs so that we live on about 55% of our take home pay, which is the reason there is always unallocated cash accumulating. In addition, we have a detailed spending plan which is always projected out 12 months into the future and includes both our regular weekly/monthly household expenses, but also recurring annual expenses. This for us is the key. We rarely have something come up that was truly a surprise, and we are never running so close to the line that most emergencies can't be funded by the excess in the account (or throw it on the line of credit temporarily and paid off with the excess income in a couple of weeks). Every week where there is no emergency (which is 99.9999% of the time) I skim off the excess cash not needed to cover the regular bills and either make an extra mortgage payment, contribute to our retirement funds, or leave it there to build up for a few weeks if we're planning to travel or sense an upcoming unanticipated expense. I figure there are very few big surprises that are actually surprises and cannot be forseen and properly planned for in your budget. I budget for summer and snow tires every 3 years for both vehicles. If we blow a tire unexpectely before that, $200 isn't going to cause a big problem. If we have a major house/car related insurance claim, the deductable can easily be covered by the excess from a week, or two at worst. I plan every year for the annual May vetrenarian bill, school photos in the fall, car tags on our birthdays, gifts in Nov/Ded, regular oil changes, etc. These are not surprises or emergencies. They happen every year. If they aren't addressed in the budget then they might feel like a surprise. Living in Canada, I don't plan for unforseen medical expenses. Some dental work isn't covered by our plans, so an accident would requiring implants or similar would require funding from our weekly excess but other than that if I'm in a car accident or develop a serious condition, our health care covers everything and there won't be bills that drive me into bankruptcy. It's important to have disability/income insurance in place to cover lost income but the actual medical costs aren't an issue. In the past 2 years the only major expenses I can think of which might have been covered by an emergency fund were an airline ticket for an out of town funeral, and replacing our dishwasher earlier than planned when it suddenly started leaking through a previously undetected rust hole forming inside. To cover my flight I skipped the extra mortgage payment I was planning to do that week. For the dishwasher we did dishes by hand for 3 weeks while we comparison shopped for the new machine and let the weekly excess build up. Bought the new machine with cash. Emergency over. Sorry this was so long. I guess my feeling is that an emergency fund would be essential if basic expenses require every cent that's coming in, or you don't consciously plan for the things that are predictable and therefore aren't ready for them. Neither of those situations applies here so having money sitting around "just in case" and not being put to work would bother me. I figure if you are paying down consumer debts and have an emergency it just goes back on then card. Yes it's annoying to run the balance back up, but if there's no emergency then you've been getting the balance down faster without letting savings sit around waiting for a problem. I’m with you No Debt Guy. I currently don’t have a designated emergency fund and don’t intend to create one. Having said that I have to add that it probably makes a lot of sense in certain circumstances. If you live to the full limit of your income and have an unstable job situation, you should have several months of expenses set aside so an unexpect loss of income or large unforseeable expense doesn’t cause a major problem.
We have an enormous line of credit (set up when we were building our home and ordering materials). It sits with a zero balance and the rate is currently 2.5% should we need to use it. Our credit card is used for EVERYTHING possible and paid off WEEKLY when I balance up the actuals against the spending plan. I want every possible flight mile, and have never paid interest on the card.
So on the one hand we have a lot of available credit should an expense come up which couldn’t be covered with the cash in our account. On the other hand the biggest reason we don’t bother with the “emergency” fund is that we intentionally cut our costs so that we live on about 55% of our take home pay, which is the reason there is always unallocated cash accumulating. In addition, we have a detailed spending plan which is always projected out 12 months into the future and includes both our regular weekly/monthly household expenses, but also recurring annual expenses. This for us is the key. We rarely have something come up that was truly a surprise, and we are never running so close to the line that most emergencies can’t be funded by the excess in the account (or throw it on the line of credit temporarily and paid off with the excess income in a couple of weeks). Every week where there is no emergency (which is 99.9999% of the time) I skim off the excess cash not needed to cover the regular bills and either make an extra mortgage payment, contribute to our retirement funds, or leave it there to build up for a few weeks if we’re planning to travel or sense an upcoming unanticipated expense.
I figure there are very few big surprises that are actually surprises and cannot be forseen and properly planned for in your budget. I budget for summer and snow tires every 3 years for both vehicles. If we blow a tire unexpectely before that, $200 isn’t going to cause a big problem. If we have a major house/car related insurance claim, the deductable can easily be covered by the excess from a week, or two at worst. I plan every year for the annual May vetrenarian bill, school photos in the fall, car tags on our birthdays, gifts in Nov/Ded, regular oil changes, etc. These are not surprises or emergencies. They happen every year. If they aren’t addressed in the budget then they might feel like a surprise.
Living in Canada, I don’t plan for unforseen medical expenses. Some dental work isn’t covered by our plans, so an accident would requiring implants or similar would require funding from our weekly excess but other than that if I’m in a car accident or develop a serious condition, our health care covers everything and there won’t be bills that drive me into bankruptcy. It’s important to have disability/income insurance in place to cover lost income but the actual medical costs aren’t an issue.

In the past 2 years the only major expenses I can think of which might have been covered by an emergency fund were an airline ticket for an out of town funeral, and replacing our dishwasher earlier than planned when it suddenly started leaking through a previously undetected rust hole forming inside. To cover my flight I skipped the extra mortgage payment I was planning to do that week. For the dishwasher we did dishes by hand for 3 weeks while we comparison shopped for the new machine and let the weekly excess build up. Bought the new machine with cash. Emergency over.

Sorry this was so long. I guess my feeling is that an emergency fund would be essential if basic expenses require every cent that’s coming in, or you don’t consciously plan for the things that are predictable and therefore aren’t ready for them. Neither of those situations applies here so having money sitting around “just in case” and not being put to work would bother me. I figure if you are paying down consumer debts and have an emergency it just goes back on then card. Yes it’s annoying to run the balance back up, but if there’s no emergency then you’ve been getting the balance down faster without letting savings sit around waiting for a problem.

]]> By: No Debt Guyhttp://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-3562 No Debt Guy Fri, 22 Jan 2010 19:36:30 +0000 http://www.moneyrelationship.com/?p=2216#comment-3562 I have often wondered if having an emergency fund is the best way to pay off debt or is it counter productive? For example if you are carrying at credit card balance of $2,500 and have $2,500 in your emergency fund you would be better off paying off your credit card and rebuilding your emergency fund. What if you have an emergency? You can still take a cash advance from your credit card and you are no further ahead. This does take some serious discipline, but you will save interest costs. I am curious on others opinions. I have often wondered if having an emergency fund is the best way to pay off debt or is it counter productive?

For example if you are carrying at credit card balance of $2,500 and have $2,500 in your emergency fund you would be better off paying off your credit card and rebuilding your emergency fund.

What if you have an emergency? You can still take a cash advance from your credit card and you are no further ahead.

This does take some serious discipline, but you will save interest costs.

I am curious on others opinions.

]]> By: Rich | Life Compasshttp://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-3561 Rich | Life Compass Fri, 22 Jan 2010 15:57:52 +0000 http://www.moneyrelationship.com/?p=2216#comment-3561 Ten years ago, we bought a used Dodge Grand Caravan. I wish the person we bought it from had told us to increase our emergency fund right then and there. That model was notorious for bad transmissions. It was already on transmission #2 when we bought it. Then we put in #3 within a year. Gratefully, we had most of the money we needed. But at the time, it was a struggle to replenish the fund. Ten years ago, we bought a used Dodge Grand Caravan. I wish the person we bought it from had told us to increase our emergency fund right then and there. That model was notorious for bad transmissions. It was already on transmission #2 when we bought it. Then we put in #3 within a year. Gratefully, we had most of the money we needed. But at the time, it was a struggle to replenish the fund.

]]> By: MoneyEnergyhttp://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-3560 MoneyEnergy Fri, 22 Jan 2010 15:47:19 +0000 http://www.moneyrelationship.com/?p=2216#comment-3560 You definitely need that cushion in order to stop using the credit cards. It's what I'm working on building up next, too, at the same time that I pay off the last credit card. Nothing like having fresh zero-balances and then needing to mar them with a new charge because you didn't have any savings! .-= MoneyEnergy´s lastest post ..<a href="http://feedproxy.google.com/~r/moneyenergy/~3/rJwGb4h4WwQ/" rel="nofollow">Seasonal Investing Rule #1: How To Use the January Effect To Your Advantage</a> =-. You definitely need that cushion in order to stop using the credit cards. It’s what I’m working on building up next, too, at the same time that I pay off the last credit card. Nothing like having fresh zero-balances and then needing to mar them with a new charge because you didn’t have any savings!
.-= MoneyEnergy´s lastest post ..Seasonal Investing Rule #1: How To Use the January Effect To Your Advantage =-.

]]> By: Adamhttp://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-3559 Adam Fri, 22 Jan 2010 14:36:11 +0000 http://www.moneyrelationship.com/?p=2216#comment-3559 Thanks Ken! We're glad it helped us out too. I think we may be able to get about half of it back from a refund and save the other $500 pretty quick. It will be there for out next emergency too! Thanks Ken! We’re glad it helped us out too. I think we may be able to get about half of it back from a refund and save the other $500 pretty quick. It will be there for out next emergency too!

]]> By: Adamhttp://www.moneyrelationship.com/budgeting/big-or-small-its-important-to-have-an-emergency-fund/#comment-3558 Adam Fri, 22 Jan 2010 14:35:06 +0000 http://www.moneyrelationship.com/?p=2216#comment-3558 Not paying for it on credit is a huge accomplishment. Like I mentioned before, not adding to debt has been crucial to our success. Not paying for it on credit is a huge accomplishment. Like I mentioned before, not adding to debt has been crucial to our success.

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