04 November 2010

This is Exactly what an Emergency Fund is for!


So often new Cheapskates ask why they need to have an emergency fund when they still have debt. They don't see the necessity for it.

Well, this morning as I was taking Hannah to school I could smell a strange odour. Now the kids laugh at me when I tell them I can smell something strange, because I am always sniffing at "strange" odours in the house or the car or the garden or wherever we are, so I kept my mouth shut.

Until we were stopped at a level crossing and the odour was stronger and then I heard the noise - a gentle hissing sound. Off went the radio and down went my window. Yes, I could definitely hear something. And then as I turned my head the temperature gauge almost blew it's needle off!

To cut a long story short (I could tell you all about the frantic phone call to Wayne, the 35 minute wait for the RACV - he was so nice and very helpful, learning to use my mobile to find a phone number, driving to the radiator place and getting the bus home) two hoses from the radiator to the heater core had split and drained the radiator - onto my feet!

There were a couple of frantic phone calls while Mark (the mechanic) figured out what the problem was and when he could fix it. Thankfully he was able to fix it for me today, we picked the car up when Wayne came home from work. Best of all, because we have an emergency fund, we were able to pay for the repairs immediately, without resorting to credit and going into debt.

When you are carrying debt and don't have an emergency fund, when life happens, and it will, you'll have to resort to credit to get through, and you'll be right back where you started, in debt, paying it off and adding interest too. An emergency fund, no matter how small, helps you avoid the debt trap. When disaster strikes you can cope with the help of your emergency fund. You won't need to resort to credit and your debt load won't increase at all.

So that's why you need an emergency fund, even while you are paying off debt. Because life is uncertain and you never know when you're going to blow a couple of heater hoses (or worse) and need to pay for them.

2 comments:

  1. An Emergency Fund has been our Rock & Fortress over the last 15 years.
    Only this week I'd budgeted for a $400.00 Car Service.
    Our car is reasonably 'newish' so every 6 months it gets a throrough service to keep it in tip-top condition.
    Unfortunately, this time we required two new tyres & full radiator flush in order to take our car safely up to the snow early next week.
    This pushed the service up $322.00 - OUCH!Thank goodness for Rainy Day Funds!
    A sizable chunk of our next paycheck will now go into pumping up our SLUSH Fund.

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  2. Have fun at the snow, and enjoy your trip in your safe and reliable car, thanks to your "rainy day" fund.

    Our emergency savings have saved us thousands of dollars in interest over the years - if we'd put every emergency onto the credit card and built the balance up and up and up.... we'd still be drowning in debt.

    Instead, having the money put away to cover emergencies has meant that we've been able to get things fixed when needed without adding to new debt.

    I'm sure you'll build your emergency fund back up quickly, once you're in the saving habit it's easy.

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