- Our furnace died in the dead of winter. There was no getting around the need for a very small (and very expensive) circuit board that blew out. And there as no waiting as the house dropped to about 40 degrees fairly rapidly since it was so cold outside.
- The car had a couple of issues, one electrical, which caused the brake light and tail light to only want to work occasionally. Now if I would have been stopped with the lights not working I would have got a ticket and a whole lot of hassle so it was best just to break out the emergency fund and pay to get the situation fixed immediately.
- A relative came down with Dengue fever--a tropical disease that is quite painful and unpleasant. Contrary to US hospitals where you can show up in the ER and receive treatment then figure out how to pay later, in the country where this event happened, if you don't pay at the ER door you don't get seen or treated.
- The spouse got laid off unexpectedly. Although this didn't cut into our normal budget, if this would have happened to many families that depend equally on both partner's incomes, the emergency fund would most likely have been tapped for living expenses.
- Last minute travel. We funded our travel to see our son who will soon be deploying out of our travel account because we knew ahead of time the approximate date he would be leaving. I have had two friends, however, who needed to leave on a moment's notice because of hospitalized relatives and have actually had this situation happen to me over the years where there isn't time to save or plan for travel because someone ended up in the hospital or they died unexpectedly. An emergency fund is the difference between heading to the airport immediately and calling everyone you know to scrape together enough gas money to drive across the country.
- The $800 cell phone bill. Some years ago (before I realized how much teenagers could talk in one month) we ended up with a surprise $800+ cell phone bill. After passing the stages of denial, shock, and anger, I ended up coughing up the cash to pay the bill so that #1 everyone else's cell phones would remain activated, and #2 I wouldn't have collections coming after me. This money was available because we had an emergency fund (note that the fund was replenished by said kid working a whole lot over the following months).
- The surprise tax bill. One year I was going along happy as a clam thinking all of my taxes were paid up to date like they usually were when I received a threatening letter from the IRS. Did you know you underpaid your taxes by over $3,000? Why no, I didn't. After practically sprinting to my accountant's office and learning that her assistant had a crisis right in the middle of preparing my taxes causing her to transpose the numbers on my form, I dejectedly went back home and cut the IRS a check. It would have been much worse if I didn't have the money in my emergency fund to cover this rather large expense.
- A very, very, very good deal. Your emergency fund is not the place to draw funds for every "good deal" that comes your way. In this case you would never have an emergency fund because there are always deals to be had. I have only used my emergency fund on a couple of occasions to take advantage of very, very, very good deals. One was for a car a friend wanted to sell--he was willing to take one quarter of the value of the car since he was leaving the country immediately and he knew it was going to a good home, and once for a couple of firearms that a widow needed to sell ASAP which were both rare, and very well priced.
- Paying off that very last debt. After spending months or years getting out of debt, you will reach a point where you maybe have $1000 left to pay and you will be COMPLETELY DEBT FREE. In this case, you may want to just pay the debt out of your emergency fund and get it over with.
- A disaster occurs. Think Haiti, think Hurricane Katrina, think something as basic as a flood in your town. When a major disaster occurs, it usually requires an initial outlay of cash even if you do have the ability to be compensated later. Gas for the car, hotel rooms, restaurant meals, replacing clothing and toiletries...all of these things require immediate cash, which, fortunately you will have in your emergency fund. While this hasn't happened to us on the scale of Hurricane Katrina, we have sheltered families on occasion who found themselves homeless due to flood or fire; they would have been much better able to handle the situation if they had had emergency funds available.
Friday, February 12, 2010
10 Uses for Your Emergency Fund
I always keep an emergency fund on hand. It is important that you ALWAYS have $1,000 to $5,000 available in cash or a mix of cash and money in your bank account which can be accessed with your ATM card. On a side note, I don't consider the use of a credit card to be an emergency fund because when you are in crisis, the very last thing you want to do is get into debt. Here's how my emergency fund has been put to the test over the years: