April has been a harsh reminder of the necessity of an emergency fund. As a recovering starving college student, I have taken the position that there are no “emergencies” I need to save for. Mainly this is because I rent, so what could go wrong that I would have to fix. The biggest I can think of is getting in a car accident and having to pay the deductible to get my car fixed. I figured, $500 I could have access to that without a huge problem or inconvenience. So why should I set aside a few thousand for an emergency fund when I could have that money working for me by saving interest on my high rate loans.

I can handle one thing going wrong and coughing up an unexpected couple hundred dollars. But this month I realized that it’s not that hard for several things to go against me all within the same month. And that is where the problems begin. It all caught up to me this month when all of these costs occurred within a 2-3 week time span.

  • $500 àCar insurance deductible. Driving on the highway….ka-thunk… Next morning I get in my car and 10” crack has made a home in my windshield. Windshield replacement is necessary considering a lot of residual stress and strength resides in the windshield.
  • $625 à 6-month Car Insurance Premium. Although I had this planned in my balance spreadsheets in advance, it was by chance I had to cough it up the same month as everything else. Severely straining the money I had available.
  • $20 (and a lot of stress) à Cell phone decides to take a swim in the washer. I don’t have a landline and it happened less than a week before I must go on a business trip. Luckily after tearing apart my apartment I found my phone from 4 years ago. I’m crossing my fingers it will last until my contract is up and I can receive a new phone. Was anticipating costing more but after a few days of kicking some sense into myself I took the lowest cost option.
  • $1,100 à Dental expenses. I guess this is what happens when you don’t go to the dentist for awhile because you had no coverage. Everything gets put off, piles up, and gets worse. Costing so much more money in the long run than if I just paid the higher prices and had preventative services.
  • $200 à Bank and Credit card penalty and late fees. Don’t even get me started on this now…I am never one to get late fees and I am usually pretty on top of all of this. I am rethinking my accounts and expense management methods and will write about what happened, reoccurring problems, changes, and solutions in a separate post. Also, when I receive my monthly statements I will be sure to argue the fees.

Total Cost: $1,820 unanticipated costs ($2,445 total)

Needless to say thank goodness for credit cards giving me a few weeks to be as cheap as I can to save some money towards all of this. And yes, I will be paying them off in full, although my savings I began in February for a down payment will be taking a huge hit. I’m also lucky that I miscalculated my tax withholdings last year and got a huge refund check, if not I wouldn’t have had enough money to pay for all of this stuff.

Learnings:

    1. Keep an Emergency Fund. Size depending upon 2-3 unforeseen circumstances occurring. If you are very positive that your job is secure then you can get away with less than the 3-6 months expenses typically prescribed by financial advisors.
    2. If you are in a state where by law windshield replacement is not free, I highly consider reducing your comprehensive deductible to 0-$100. Apparently this barely affects overall insurance as it only raised my 6-month premium by $25. This more than makes up for the extra $400 I got stuck paying since it would take 8 years of additional premium to add up to this amount! I guess be aware of your state regulations. Up until this year I always lived in a state where this was covered for free since it is a safety concern.
    3. Skipping preventative health care paired with bad habits can cost a lot in the long term. Usually outweighing any short term gains.
    4. Sometimes the best financial thing to do may not work with your personal lifestyle or situation. Occasionally take the time to reassess whether your methods are working for you or against you.
    5. Life is expensive and no amount of planning can get around that.

Short version of the story: Lots of unexpected expenses have used up the $1,200/month I anticipated on saving for May and June. Huge savings setback.

Advertisements