battling emergencies when trying to pay off debt

[misscity]

I find myself still in my debt as emergencies keep coming up which wipe out my $1,000 emergency fund. How do I cope with building up my EF only for something to come up that cleans me out? Maybe there is no answer to this problem only to dust myself off and save again so I guess I'm just venting. Does anyone else experience this?

[disneysteve]

What types of things are you calling emergencies?

I just reviewed your earlier thread about spending money. A number of people asked questions about your budget that never got answered. Can you post your full budget and income info so we can help you figure out where things need to be adjusted to make all the numbers work.

ETA: If you could list your budget item by item, that would help a lot. Earlier, you lumped together a bunch of different things as "fixed expenses" totaling over $1,700 but didn't break that down. Also, what is the balance and payment on the car loan and what is the balance, interest rate and minimum payment on the CC and any other debt?

[misscity]

Hi-thanks for answering.
My past emergencies were paying some funeral expenses, medical/dental, helping family, and the recent emergency that I did not foresee was taxes. I've adjusted my withholding to prevent that next year.

I'm looking to see if anyone else has experienced similar situations with their EF. I'm not looking to adjust my fixed expenses right now but I understand how that info would help. I was just curious if there were others in the same boat and wanted to commiserate

[maat55]

It is hard to get traction when one is living near the edge. In many cases it can be too much house, car or frivolous spending getting in the way. This can be rendered by getting extra jobs, selling a car or other things or even selling a home.

I got out debt my first time by selling my home, the second time I cut my budget to the bone and worked longer at my business. I have not eased much on my frivolous spending and am ammaculated to saving aggressively in order to not let emergencies disrupt my goals.

My EF is sacred. I look for any avenue to avoid dipping into it. I have no touched it in the whole time I have had it, not even when my wife wrecked her car and the loaner.

[creditcardfree]

Originally Posted by maat55

My EF is sacred. I look for any avenue to avoid dipping into it. I have no touched it in the whole time I have had it, not even when my wife wrecked her car and the loaner.

This is true for our family as well. We do everything we can to avoid touching our emergency fund. Honestly, I think it has been over three years since I touched it. The real goal is to have one that barely gets used. If it is being dipped into frequently, then it is likely your living expenses and spending are much too close to the income you are bringing in.

We also don't let other peoples emergencies become our emergencies. It is our choice whether to give if help is needed.

OP, of course I can understand your frustration. I want to commend you for continuing to move forward despite the loss of your emergency fund. At some point, it will get better.

[disneysteve]

Originally Posted by creditcardfree

f it is being dipped into frequently, then it is likely your living expenses and spending are much too close to the income you are bringing in.

It could also be that your budget is incomplete and doesn't include items that it should. People often post about an "emergency" car repair. Car maintenance should be budgeted for, maybe $100/month. If your budget doesn't include that, when the inevitable repair happens, you aren't prepared.

We also don't let other peoples emergencies become our emergencies. It is our choice whether to give if help is needed.

This is a biggie and one that Suze Orman is always getting on people for, especially women since it is typically women who tend to do this. While helping family is very nice, you need to be sure you have all of your financial ducks in a row before you start helping others. Don't feel obligated to help others when you are struggling yourself. There will always be somebody in need. If you don't consistently put yourself first, you'll never get anywhere.[/quote]

[irmanator]

I just had to dip into mine for a car repair but only because I am new to this and the car repair was more than the car repair fund. But I expect that to not be a problem forever and just glad i had the money somewhere so I didn't have to go to the Bank of DAD.

[BlackDiamond]

I also have this problem. I am just an unlucky person. In the span of a week a few years ago my car which was only 3 years old at the time, completely died and the warranty had just expired. Then my basement got flooded and I lost a large chunk of my ebay stuff (=lost revenue), my nana passed away (= travel expenses for me) and my favorite place to visit in the entire world permanently closed it's doors for business, and then the guy I'd been dating for 3 years at the time left me for his former flame. The latter 2 had no impact on my finances but just added insult to injury. Then, that same week, my 2 year old dog ate a string and required 2 extensive, expensive surgeries. Then he died because of complications of the second one. That week cost me almost 25K, most of it debt that I am still paying off. The dog surgery and car were the bulk of it. Oh, then I got sick as well and had a huge medical co-pay/deductible for the tests.

I've bounced back my EF/cash savings since then, but I still have $12K in debt. I now have dental work that needs to be done and my car needs new tires and some other work done and insurance doesn't cover most of it. My entire EF will be drained again. But at least I likely won't have any debt this time.

I get kind of annoyed when people preach about this because I have to wonder if they have ever had 4 or 5 serious financial emergencies come up in the span of a week or two before? I don't care who you are or how good you are with money: when your new-ish car dies, your nana passes away, your puppy requires surgery, you require medical testing and on top of that other sad things drain your engery within the span of a week you are going to either wipe out most of your savings or go into debt.

Unless you are rich. Which I am not. Not everyone brings home $6000 a month. Not everyone can put aside $100 a month for car repair. I honestly don't know a single person in real life who can afford that on top of normal savings. With just over $2K a month income in a HCOLA that would be virtually impossible.

[LivingAlmostLarge]

BD, you just spend money. You are preaching to a choir. I admit to being like DS, I plan and budget for "unexpected" expenses other people have. I have a LARGE monthly bill because we save for home repairs, car repairs, travel, etc. Some are wants and others needs. I mean people say "oh my shoes broke", well weren't you setting aside money for clothes? Or was it expected clothes would last forever.

As for big unexpected expenses, trust me, I never thought I'd spend so much on a pet. We spent more in 1 week than we bring home in a month. I shudder because I still haven't added up the final bill of our dog from 11-2009. But it wiped out our car fund, which was um, substantial. I know I'd get a lot of grief for spending that sort of money so I try not to think about it.

[creditcardfree]

Originally Posted by BlackDiamond

I get kind of annoyed when people preach about this because I have to wonder if they have ever had 4 or 5 serious financial emergencies come up in the span of a week or two before? I don't care who you are or how good you are with money: when your new-ish car dies, your nana passes away, your puppy requires surgery, you require medical testing and on top of that other sad things drain your engery within the span of a week you are going to either wipe out most of your savings or go into debt.

Unless you are rich. Which I am not. Not everyone brings home $6000 a month. Not everyone can put aside $100 a month for car repair. I honestly don't know a single person in real life who can afford that on top of normal savings. With just over $2K a month income in a HCOLA that would be virtually impossible.

You are right, not everyone does make that much per month. And your emergencies did seem to come all at once and it does happen. And when they do you use your emergency fund, and then make some hard decisions. Decisions about whether the emergency is worth going into debt for. Some are, some aren't.

The real point, is to keep trying to maintain an emergency fund and continuing to evaluate what is really an emergency. Identifying the emergency is just as important as funding it. An emergency fund is the critical building block to a good financial plan. You won't get anywhere without making the sacrifices to build and maintain an emergency fund.

[BlackDiamond]

What do you mean "I just spend money"?

Do you think I wanted to spend money for car repairs, a dead dog or traveling to a funeral?

I wish I'd just let the dog die in my living room. I wish I'd just trashed the car since it died again 6 months later and could not be fixed. I would never spend money to travel to a funeral again.

[disneysteve]

Originally Posted by BlackDiamond

my favorite place to visit in the entire world permanently closed it's doors for business

I'm curious what place that is.

I now have dental work that needs to be done and my car needs new tires and some other work done and insurance doesn't cover most of it.

These are the kinds of things I'm talking about. I have a car and I know that tires need to be replaced every certain number of miles, maybe 40,000 or so. I know that I have to see the dentist every 6 months. Those kinds of expenses are part of my budget, not things that come out of my emergency fund.

Unless you are rich. Which I am not. Not everyone brings home $6000 a month. Not everyone can put aside $100 a month for car repair. I honestly don't know a single person in real life who can afford that on top of normal savings. With just over $2K a month income in a HCOLA that would be virtually impossible.

Now this is an excellent point. Yes, if someone is living on minimum wage or close to it, especially in a high cost area, many of the things that we all routinely recommend may be difficult or impossible to accomplish. That's why, when someone posts a question here, one of the first questions we usually ask is how much you earn and what your expenses are, because that will greatly influence the answer. That said, however, it just might be that someone earning minimum wage can't really afford to have a pet or, as difficult as it may be, might have to not attend a funeral out of town.

The bottom line is that no matter how much you earn, whether it is $2,000/month or $4,000 or $10,000 or more, you have to find a way to live within your means. The less you earn, the more difficult decisions that will inevitably involve. I certainly don't envy those in that situation.

[BlackDiamond]

The Adventurer's Club. I never got to go one last time. I had been saving up and planning to. But then it closed. I know you know what that is DisneySteve.

[disneysteve]

Originally Posted by BlackDiamond

The Adventurer's Club. I never got to go one last time. I had been saving up and planning to. But then it closed. I know you know what that is DisneySteve.

Yes, that was a tough one. Still a lot of grass roots support to bring it back, but I know they sold off lots of the decor and props. Still, I wouldn't be surprised if it comes back in a new incarnation at some point. It was incredibly popular.

[BlackDiamond]

I hope. I only got to go a few times and considered it my absolute favorite place in the world. I can only imagine how hard it was for people who were local and went all the time.

[wincrasher]

You have to reduce chaos in your life to achieve financial stability. It's very difficult to describe how to do this.

Part of it comes from reducing your risks. Spending money periodically to have the car checked out - preventative maintenance, watching your gas mileage, listening for "sounds" that are unusual. Not blowing your EF or going in debt to keep a pet alive. Pets don't care if they live or die - humans do.

Some people just claim that they have bad luck. I don't buy that at all. Choices we make today have long, long chains of consequences. You have to remain calm and centered and think about what you are doing before you do it.

[creditcardfree]

Originally Posted by wincrasher

Some people just claim that they have bad luck. I don't buy that at all. Choices we make today have long, long chains of consequences. You have to remain calm and centered and think about what you are doing before you do it.

I tend to agree. It is a good idea to try to take the emotion out of decisions that lead to dipping into an emergency fund. Although, I rely on fear to keep me out of mine!!

My friend has operated with out an emergency fund her entire adult life. They took out large student loans to cover tuition and living expenses for her husband. All emergencies have resulted in debt. The debt has had to move to home equity loans, and now a 401K loan just to be able to make payments. She has bats in her house and car repairs, put on a new credit card, that she has no ablility to make payments on. What happens when the next emergency arises? At this point, it is going to take a lot of work to break the chains of consequences she is about to endure. And these people make just over $100K per year.

[wincrasher]

Bats and car repairs.

Is suppose that is better than bears and a broken furnace.

[jIM_Ohio]

Originally Posted by misscity

I find myself still in my debt as emergencies keep coming up which wipe out my $1,000 emergency fund. How do I cope with building up my EF only for something to come up that cleans me out? Maybe there is no answer to this problem only to dust myself off and save again so I guess I'm just venting. Does anyone else experience this?

To what level do you spend less than you earn?

We save 25% and spend 75% of gross.

We get emergencies all the time, and our EF is nowhere near as high as I want it to be.

However, of that 25% we save, much of it is liquid, and we don't send money to IRAs until the end of the month, and our earnings this month pay off next months bills.

So when a $2600 tax bill came this year, turn off the IRAs for 2 months and we have the $2600 (we send $1000/mo to IRAs). Last year a $7000 medical bill hit us in Q1, we solved the problem the same way.

You need to build this into budget- the funeral should be covered with life insurance if funeral was for an adult. If it was for someone else (a parent) which did not have LI, let that be a lesson and make sure you have funeral expenses for yourself and spouse covered now (with LI).

Spend less than you earn, that is #1 key to financial success.
If you are not seeing success, spend less.

[disneysteve]

Originally Posted by jIM_Ohio

the funeral should be covered with life insurance if funeral was for an adult.

Jim, OP didn't have to pay for a funeral. She had to pay to travel to attend a funeral.