The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

November 11, 2009

The Importance of an Emergency Fund

Filed under: Personal Finance, Real Example, Simulation — Tags: , , , — thebalancedspreadsheet @ 10:50 am

When getting financial advice from financial planners, either on TV, through books, or, most highly recommend keeping an emergency fund handy.  The last few weeks have really enforced why we do have an emergency fund in place.  First, my wife got into an accident driving to work on a wet morning a few weeks ago.  Thankfully she was all right but the car was not as it needed a new back bumper and had to be taken to the body shop for a few weeks.  Next, last Wednesday when my wife and I were getting ready to leave our house when we discovered that our electric garage door would not open at all!  After getting a repair man to come out and fix it that night, it was discovered that we had a broken spring in our garage.

All in all, after paying for our deductible, new tires, a rental car for my wife while her car was in the shop (which the insurance picked up about 80% of), and the garage door repair man we were out roughly $875.  Thankfully with the emergency fund, these situations were not true financial emergencies, rather just financial inconveniences. 

All this has made me think of how essential the emergency fund really is in one’s financial plan. Unexpected expenses occur all the time, you just do not know when and importantly how much.  It will be very difficult to plan and budget correctly without an emergency fund because you will constantly be putting out fires that arise, whether it is job loss, car problems, leaking roofs, broken heater system, etc.  Having the emergency fund in place will give you peace of mind as well as the ability to financially bounce back quickly if something major occurs.  Unfortunately it does take times like we have had the last few weeks to realize why you do have the emergency fund.

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4 Comments »

  1. This post really hits home w/ me. I truly believe in the emergency fund because you never know when an emergency will come. My wife and I have many different rainy day / emergency funds (7 total) on top of our regular savings which is known to my wife and I as “DO NOT TOUCH”.

    Two emergency funds I believe will pay dividends in the end are the house repairs and car repairs account. We set the accounts up at http://www.ingdirect.com and put $125 in each account at the beginning of every month. Our goal is to have $1500.00 in each account by the end of 2010. We should reach this goal before then barring any emergencies 🙂

    Comment by Joe — November 15, 2009 @ 6:47 am

  2. […] took a bigger hit then what was expected primarily due to some unexpected financial emergencies this month.  We also had our semi annual car insurance payment due at the end of the month.  […]

    Pingback by November ‘09 Net Worth Update (+4.23%) « The Balanced Spreadsheet-Financial News, Advice, tips, and more — December 3, 2009 @ 10:51 am

  3. […] } Here is a quick cash breakdown before the end of the year.  Despite having  various emergencies, our Car/Vacation fund has surprisingly risen since September. Cash Breakdown November […]

    Pingback by Cash Breakdown November 2009 « The Balanced Spreadsheet-Financial News, Advice, tips, and more — December 11, 2009 @ 9:27 am

  4. […] personal experience, I can vouch for how important an emergency fund is.  It will help ease the pain of a sudden […]

    Pingback by The Financial How to series Part III. How to start and maintain an Emergency Fund « The Balanced Spreadsheet-Financial News, Advice, tips, and more — January 23, 2010 @ 1:08 pm


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