The Broken Air Conditioner, the 94 Degree House, and the Emergency Fund
Eileen St. Pierre, The Everyday Financial Planner
After working out of state for 3 months, my husband and I were looking forward to returning home to Oklahoma. As we opened the door to our house, we were met by a rush of hot air. Our house was 94 degrees, but the air conditioner was running. Our hearts sank. How long has this been going on? The air conditioner was working fine when we “visited” for the July 4th holiday. We checked back into a hotel. Looking on the bright side, we were already packed.
Emergencies can be expensive.
Many of you have found yourselves in similar situations. In our case, our cash outlay could have been a lot worse. Since we travel so much, we are currently renting our home. Our landlord put us up in a hotel and will pay for repairs. But it will still cost us due to:
- Eating out a lot more than we intended.
- Having to pay the hotel bill until we reconcile with our landlord.
- Higher than expected electric bill.
Let’s not forget the increase in stress from having to uproot our lives for a week.
Your emergency fund is for emergencies – Use it!
Yeah, it may cost you $1,000 to handle your emergency. Don’t be afraid to use your savings for this. You can then work on replenishing your emergency fund later. I get so annoyed when people won’t use their savings to handle an emergency but instead will use it to buy something they really don’t need.
Use this alternative approach to determine how much to save in your emergency fund.
Take how much an average emergency may cost you. Multiply that cost by 3 (since emergencies always seem to happen in threes). Place that amount into savings.
Yeah, I know, you are supposed to have at least 3 months living expenses saved for emergencies. How many of you can tell me how much that is? I bet a lot of more of you could tell me what your last 3 emergencies cost you. If I can get you to save that much, I’ve done my job.
For more budgeting tips, visit my Basic Financial Management page.