What IS an emergency?
April 14, 2009 2 Comments
I am frequently torn between what is truly an emergency and what is something where I just “want” money to get through the month.
For instance, in the past I’ve used my emergency fund to pay for a trip to San Diego for Thanksgiving and Laser Hair removal. Now I justified the hell out of it, and in the end I don’t regret the decision. But I need to have a stricter policy for my emergency fund.
I read this:
“A real emergency is something that threatens your survival, not just your desire to be comfortable.” at Get Rich Slowly and it struck a cord.
It is completely true. But at the same time, there are “minor” emergencies that don’t “threaten my survival” but that I HAVE to pay that I may not have the MONEY to pay. For instance, if my dog needs surgery or my car needs serious maintenance. These are things that would have been put on the credit card that I feel now should be paid for by the emergency fund.
So I guess, in my mind, there really should be 2 different funds:
*a smaller “minor” emergency fund
*a larger emergency fund
And I guess this falls in line with what Dave Ramsey recommends with getting a $1,000 emergency fund before you start paying off debt, so that you aren’t tempted to use cards if a minor emergency does occur. I think that after I get the amount in an emergency fund that I would like to have on a credit card – somewhere between $2,000-3,000 – then I’ll lay off the emergency fund savings and finish paying off all my debt but the student loan. When that is done (hopefully in the next 2 years!) then I’ll be able to throw the rest of my money into paying off the student loan and starting to make a long term emergency fund ($10,000).
I also will need to replace my old hunk of metal on wheels at some point. I’m not even sure when I’ll be able to start saving up money for this. It seems that 2 years would be a stretch for savings money for a car, but that is the time frame I’ll need a new one (or sooner, perhaps). We’ll see what happens.
For now, I’ll keep on saving and hope that a life threatening emergency doesn’t happen.