We are once again going through a period of major expenses chez McHale. May has brought with it some major budget busters.
We are still following Dave Ramsey’s Total Money Makeover principles and honestly I would say that now it is an adopted lifestyle. This month it’s been a really good thing.
This month we’ve had a pipe break under the floor in our kitchen, we’ve replaced the hot water tank, and another unit in our complex has required some major repairs which all the owners here have to pitch in for (this is normal in any condo/townhouse).
It has really squeezed us. In fact I’m not sure that we’ve felt squeezed quite so tight since before we started working this plan.
The difference now is that we have an Emergency Fund.
What you may ask is this thing we call an Emergency Fund?
It’s 3-6 months of our household expenses in cash in a bank account that is easily accessible in an emergency.
WOW have we ever been glad to have it this month.
We managed to scrape up enough cash to cover most of the repairs but there comes a point when you just can’t do it anymore. Enter the Emergency Fund. We were able to cover the remaining expenses in CASH because of our little stock pile.
In the days before we paid off our debts and decided to change our financial future we would have paid cash for a lot of these expenses but we would have come to a point when the money would run out and we would have used a credit card or line of credit to pay it.
I am so thankful that we are able to avoid doing so!
The importance of an emergency fund has hit home a number of times over the last year as we’ve seen the local teachers strike for months last spring, another local union strike for 12ish weeks, and watched as more than one family in our circle has experienced significant illness taking their primary bread winner out of work, and forcing the other half to go back to work during the crisis to help pay the bills.
During the local strikes especially I kept hearing stories of families where the sole income earner or even both income earners were employed by the same union – these families lost their entire income during that time. They were then going to the banks trying to get lines of credit or loans to pay their bills for the duration of the strike.
I would not want to be in any of those situations and I hurt deeply for those families. I cannot imagine what they went through.
The problem is that when you take out a loan during a crisis or emergency to get by you deal with the hangover for much longer than you may actually have to deal with the situation because you’ve got to pay it back.
I’m not criticizing any of these families they were all doing the best they could to get by. I’m just saying that as I watched these things happen I realized just how important having an emergency fund really is.
The sad thing for a lot of the families affected by the local strikes is that they were in industries where the jobs are considered very “stable” which proves to me that you never know. If they succeeded in getting a loan to help with their expenses they are most likely still paying that loan back now a year later.
For me watching from the outside it drove the home the importance of the Emergency Fund. There is a lot of security and peace of mind in knowing that if for some reason Curtis couldn’t work for a few months our bills are still paid.
Sure we would have to cut back on some of our “lifestyle” spending but really we can get by for a while without too many worries.
As painful as this month has been we’ve been able to get by. We’ve had to cut out pretty much all of our “lifestyle” spending. We’ve adjusted a few things, but the truth is, that it’s just one month. Looking at our June budget we’re able to replenish the Emergency fund after our little dip and things for the most part will return to normal.
So what about you. Could you pay for a few thousand dollars worth of emergency expenses tomorrow if you needed to or would you be running out for a loan? Have you thought much about living debt free and building an Emergency Fund? If not I would encourage you to do so!