It wasn’t until five years ago that I understood the importance of an emergency fund. Before that point I have five other reasons not to be concerned about such a fund. Those five reasons were five different credit cards, all with large credit limits and increasing balances. They were who I called upon when an emergency popped up or actually when ever I felt I wanted or deserved something too. It was so easy to reach into my pocket and swipe the credit card and deal with the consequences later, then deal with them up front. Because the reality of that would have meant I wouldn’t have made the purchase or figured out another way to deal with that emergency situation. It was that small change in my thinking of dealing with things first, and having a plan that gave me a clear understanding of the importance of the emergency fund.
Peace of Mind
I first called an emergency fund a piece of mind fund early this year. Now I’m not sure if that an original thought coined by me or if I read it or heard it somewhere else, but what I do know that once we established a $1k emergency fund back in 2010 things began to change. That $1k insulated us from a lot of life that happened, you know those unexpected things that pop up, the Murphy. I didn’t fear Murphy any longer all because of $1000 sitting in my bank. Because I knew with that cash I could handle any minor unexpected thing that was tossed at me. We had our share. So when the cars broke down, or the dishwasher blew up I turn to the e-fund for help. The funny thing was now that I had ten hundred-dollar bills in the bank. I didn’t want to part with them, so I looked for the cheapest (and safest) way to fix the car. I called my brother and we took the dishwasher apart and ordered the replacement parts to fix it. Prior to having the emergency fund establish I would have just reached into my pocket and grab the credit card to buy a new dishwasher altogether, instead of buying a $50 part to repair the one I had. I owe that shift in thinking and behavior to the fact that once we put the e-fund in place we didn’t want to deplete it.
Since we began our financial make over we have had some major events occur in our lives. My wife was in a car accident, injured, was out of work for a year and required surgery. She recovered nicely returned to work, than had emergency gall bladder surgery and was out of work for another ten weeks. My position of over 20 years was eliminated. Through all of these major things we never panicked, why because we had a plan with our money. Sure these events were stressful, concern for my wife’s health was top priority, but we had put ourselves in a position if she never returned to work that we would be okay. A job loss can be crippling to an individual and a family if not prepared. It’s an emotional event, a big change, even a blow to one’s ego. Having not to worry about immediate income through a transition like this makes all the difference. That’s what an emergency fund does for you. I can’t image not having an e-fund now. I certainly wish all of any of the events I described never happened to us, but they did, but lucky the happen over the last five years and when got our act together, because if they happened say 6 or 7 years ago they would have add so much stress and anger to the emotion mix I’m not sure how we would have handle it all.
What’s the biggest emergency your fund has insulated you from? If you don’t have a fund establish yet what is your target savings? And why?