emergency fund

Archive for the ‘emergency fund’ Category

How to Avoid Hazard Debt

Friday, July 12th, 2013

The last few years have seen an increase in natural disasters, such as hurricanes, tornadoes, thunderstorms, wild fires, and earthquakes. These types of disasters haven’t been relative to one area or another, but they do have one thing in common – they’ve managed to destroy homes, lands, and the lives of people who have affected.

The worst part about all of this activity is the people who manage to live through it with their lives, but not much else. Certainly, the fact that they managed to live through a flood or earthquake with their lives is great–heaven sent–and we should all be thankful that we can at least say we’re living to see another day. However, once you get over the fact that you’re alive to live another day, you’ll realize that you’re living without the comforts of the home you once shared and the things within.

When it comes to rebuilding your life, it’s not unheard of for people to fall into debt faster and further than they were before. Think about it – you have nothing left and unless you’ve managed to squirrel away enough money to replace everything that you’ve lost, chances are, you’re going to start from the very bottom rung all over again, especially if you are victim to a disaster not covered by insurance. That in itself can be devastating and may leave you unprepared for what you need to do next.

So how do you avoid losing your home and everything in it?

Well, as with everything in life, you can’t always be prepared against every matter that comes along. However, when it comes to making sure that your home is truly safe, you need to get a hazard disclosure report to know the full extent of the damage that your house is susceptible to.

What is a hazard disclosure report? In terms of real estate, it’s the disclosure that an area is within a natural hazard area; realtors are legally required to disclose this information.

In the state of California, realtors are required to tell their home buyers about areas that are flood, earthquake, fire, and seismic hazards. This is true for any area that might be prone to different types of natural disasters, including hurricanes. Knowing about the area that your house sits in will help to minimize the damage that you can expect. For instance, let’s say that while house hunting you find a home that sits right in the middle of a flood hazard area; you can ask what the likelihood of a flood hitting your house could be.

This can help you decide if you want to actively purchase the home or if you want to go about flood proofing it. Just remember that if you decide to purchase a home in a hazard area, that you’ll most likely spend more safeguarding it, assuming that a previous homeowner hasn’t done so already. Just because your home is a ways from say, a wildfire hazard area, doesn’t mean it is completely out of danger.

Make sure that you are aware of just how far – or close – you might be to a hazard area. As California, Arizona, and Colorado residents are aware, summer time is worst for wildfires, with fires sometimes blazing further than anyone anticipated. Even earthquakes can have after shocks miles further from the epicenter, make sure you’re prepared for all contingencies.

When It Rains, It Pours – But We Keep Trudging Through

Monday, February 23rd, 2009

On Friday, I got into the trusty Toyota (the 1996 Corolla with 203,000+ miles) to drive home from work.  Upon turning the car on, I was greeted with a light on the dashboard I’d never seen before.  Check… something.  Some weird alien-looking drawing.  I took out the manual as my heart skipped a few beats, and found the decoder there – this was the Toyota’s check engine light.

Great.  I have to admit I got out of the car and kicked it.  Lightly!  But still.

I do have to admit, it took over 200,000 miles for either me or my spouse to ever see this light, and the just-turned-100,000 mile Saturn has given us its light so many times I’ve lost count.  But still.  I wasn’t pleased.

So as I pondered the fact that cars drive me crazy, my spouse made an appointment to take it in on his way to work today.  And the diagnosis?  A failed oxygen sensor, which in the Toyota is a bit under $400 to replace.  (It’d be cheaper if we could do it ourselves of course but that is not happening, I want to be able to drive the car again someday.)  Interestingly enough, this is one of the few drawbacks to the Toyota vs the Saturn, the same exact repair was about half as much in the Saturn a few months back.  But I digress.

By a stroke of cosmic coincidence, about $400 was the exact amount I had just moved from our checking account to our savings account to begin growing our emergency fund over $1000.   If the Saturn hadn’t emptied and then some our car maintenance/repair fund in January, we’d have some money saved specifically for repairs, but we don’t yet.  So, that $400 comes back out of the emergency fund, we replace the oxygen sensor, and the emergency fund is again back at $1000.  I am beginning to think that the world would like our emergency fund to stay at $1000 for some undecipherable reason.

So the emergency fund is still at $1000,  we’ve made zero progress on the new-to-us car fund, and the last remaining debt is being eliminated at a snail’s pace.  2009 is shaping up to be one rocking year.  I am using positive thinking to expect March to be better.  On to March!

Does The Economy Make You Want To Pay Off Debt Or Build Up Savings?

Friday, January 9th, 2009

Editor’s note:  I set this post to publish yesterday and made the classic “New Year” mistake of setting the date to 2008!  When I looked this morning at my blog, I was confused as to why yesterday’s post wasn’t showing… okay, I found it.  Heh.

When I started this blog, our #1 priority was to pay off our non-mortgage debt.  We had quite a lot of it, and the minimum payments alone were a significant amount of our monthly budget.  We saved a $1000 emergency fund to keep us from having to resort to credit card usage, and then systematically started debt-killing.  First the credit card, then one student loan, then the car loan.  Now, we’re left with a $10000+ student loan, and a minimum payment of $145 versus the over $800 minimums we were tied to just 18 months ago.

As the economy changes, and as our debt shrinks, I began to wonder if staying the course and focusing 100% on debt reduction was the wisest path.  A $1000 emergency fund, at the time we saved it, seemed like a huge amount of money.  It still does seem like a huge amount of money, as far as spending that much on one thing, but at the same time, the past few years, we’ve had several emergencies that were over $1000 out of pocket.  We’ve been able to cover the difference with budgeted money or snowflakes we hadn’t spent on debt yet, but it showed me $1000 probably wasn’t enough for an emergency fund for us.  And then my car tried to die for good (although for now we’ve stayed the inevitable), and I realized we were going to get ourselves into even more debt trying to pay off the debt we already have if we didn’t become more prepared for life happening.

Even without a specific issue looming, the economy seems more uncertain every day.  Jobs that might have seemed stable are not quite so stable.  Growth industries stagnate.   It makes me want to hoard money and hide.  Not that that is a good plan or anything, but the uncertainty around me makes me want to hoard and wait and try as much as possible to be prepared for anything.

Are you still aggressively paying off debt?  Are you increasing your emergency fund?  A bit of both, as our current course is?

What Does A “Fully Funded” Emergency Fund Mean To You?

Wednesday, December 17th, 2008

Every time I hear the words “fully funded emergency fund”, I start to think about what that really means.  And thus far, I haven’t really come up with a good clear definition.  There are lots of ideas and suggestions out there, but the definitive answer eludes me.  Mostly because there really isn’t one.

There is a lot of banter among personal finance blogs, writers, experts, and even everyday people about the fully funded emergency fund.  The general wisdom is that a fully funded emergency fund is 3 to 6 months of expenses in savings or another easily liquidated account.

Besides 3 to 6 months being a wide range for even the average person, it begs the question – what does the “fully funded” emergency fund mean to you?  Is 3 to 6 months enough?  Is it too much?  Do you trend towards the 3 or the 6 or something else entirely?

As the economy does more things that unsettle me, I’ve begun to really ponder the whole paying down debt versus hoarding cash angle.  There will be more on that in a future post, but the whole idea has made me really question what exactly is a fully funded emergency fund, and if there really is a rule of thumb I should use or follow.  How do I decide what fully funded means to me?  How much savings should I shoot for to be held in a savings account “just in case”?  What impact does that number have on the rest of my financial aspirations?

There are a lot of questions in this post and no real answers.  So I ask you – what do you consider a fully funded emergency fund, and why?

Why We Have An Emergency Fund

Monday, November 10th, 2008

Wednesday afternoon, my daughter developed a rash on the insides of her thighs.  I had put a new pair of pants on her that morning, and I thought maybe she’d had an allergic reaction to them.  We changed the pants, and the rash didn’t seem to get any worse.  Problem solved, I thought.

But the next morning, the rash was all over her lower body.  I called her pediatrician, and they suggested hydrocortisone cream.   But by Friday morning, the rash had spread even more, and she had a fever as well.  The pediatrician then decided it was a reaction to the MMR vaccination she’d had the week before, and said to treat the fever as needed and it would start to get better in the next day or two.

By yesterday morning, her hands, feet, and face started to swell up.  I rushed her to urgent care, and after they looked at her and then consulted by phone with our pediatrician’s partner, they sent us to see our pediatrician’s partner in his office, on a Sunday no less, and he diagnosed her with a systemic, whole-body allergic reaction.  He gave her steroids, and sent us home with a prescription for steroids for the next two days, plus instructions to dose her with antihistamines every six hours.

At many points Sunday morning and afternoon, I thought we were headed for the hospital.  We may still be.  She’s not out of the woods yet.  Hopefully by the time you read this, the steroids will be doing their work and she will be a lot better.  But this is exactly why we have an emergency fund.  Whatever happens, whatever copays we have to pay (we’ve paid for the urgent care copay and the steroid prescription, but who knows what a Sunday visit to a doctor costs), and whatever happens in the next few days, I didn’t have to think about money.  I could just focus on taking care of my child without the added worry of how we were going to pay for it.