Tuesday, November 27, 2012

Our Emergency Fund Saves the Day!

If you follow me on Twitter, you may have read that, yesterday, my car broke down.  I’m taking it to the shop today, but I’m not sure yet how much it will cost to repair.  It is less than a month until Christmas and suddenly, we have this unexpected expense!

I can’t say that I didn’t feel any worry.  I did (I needed to get to work!).  But, not because we didn’t have the money.  We do!  Thanks to Dave Ramsey and his Total Money Makeover baby steps, we have an emergency fund!

The very first baby step that Dave teaches is to save $1000 for a beginner emergency fund.  This money, kept in a saving account, is not to be touched except in an emergency.  This protects you from the temptation of borrowing money when you have an emergency.  Because, you will have an emergency!  

If we didn't have this money set aside, my car breaking down would have been a disaster!  We would have had to wait until DH's commission check came later this week and then it would have taken a large chunk of our Christmas money.   But, just a $1000 emergency fund means that we can still buy Christmas gifts and pay all our bills without borrowing money.

I know that when you become excited about getting out of debt, it may seem silly to save $1000 for emergencies.  After all, you've lived without it this long, so you don't really need it, do you?  Yes, you do!  And here is why:
Don't Skip Baby Step 1!
  • You will have an emergency!  Unplanned, unexpected things will happen and they will cost money!  It is just a part of life.  
  • Up until this point, you've probably paid for these unexpected things on your credit card.  But, now that you are cutting up the cards and working to pay them off, you need a new plan!  This means CASH!!! 
  • If you don't plan ahead for these emergencies, they will bust your budget!  You don't want to use your grocery money to pay for a broken down car.
  • When an emergency happens, you want to be able to pay for it right away, not wait until payday!
  • Imagine, not having to wonder how you will come up with the money you need.  It will be there waiting for just such a situation!

Having $1000 in the bank that you don't touch except for emergencies turns those emergencies into an inconvenience!

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