Tuesday, January 31, 2017

The Most Important Fund In Your Life

If you only have one fund in your life, it should be an emergency fund. This is the most important savings you will ever have.

When we were starting out as a newly married couple, we decided we needed to save an emergency fund. However, we didn't know how much we should save. We started out putting $10. a week into it. With the small salary Hubby had and the fact that he was going to college nights, we weren't sure that we could swing that. After all it was $40. a month which was half our rent. But we budgeted for it because we decided it was a necessity. What if our car broke? What if we had an emergency high medical or dental bill? What if his college tuition took a huge increase? What if his books were more expensive than what we had budgeted? Most importantly, what if he lost his job?  You know the things that happen to everyone. At first I was not working, so $ 40. a month was a lot of money for us to save. But we stuck with it and made it work. 

When I found a job about 4 months later, we made a decision to never spend a penny of my salary. We also discussed how much we should actually save in the emergency fund. We decided it should be $10,000. because with both of us working that would cover about 1 year's salary. So we took half of my salary and put it towards the emergency fund every week until we reached that $10,000 while still taking $ 40. a month from Hubby's salary towards it. The other half of my salary we saved toward a down payment on our first home. At the end of the month after all bills,emergency and home savings were paid, anything left went towards that emergency fund. 

It took us a long time to save up to that $10,000. but we did it. And we were so glad we did. Shortly after we bought our home and I had quit working, Hubby was hit by a car while walking from the parking lot into his place of employment. Hubby had just switched jobs a few weeks before that. He was laid up in the hospital for 6 weeks. Fortunately our health insurance had kicked in. However he was paid at full pay for only a week and a half and then at half pay for a couple of weeks and then no pay while he was hospitalized. If we had not had that emergency fund I don't know what we would have done to pay our mortgage, electric, gas and telephone bills, food, gasoline, insurances, etc.

We probably could have asked his parents or my mom for a loan. However, that is not something Hubby would ever want to do. Our parents had earned their money by working hard and should never have to pay for an adult child. That was a rule that we kept our entire lives. We never asked our parents for money. They never even had a clue about our money. It just wasn't something that was talked about.

So we made it through that crisis and then continued to pay into that fund when Hubby went back to work until we had $10,000. again. As Hubby's salary increased we always added to that fund. We would quit adding to it as soon as the fund equaled one year's salary. We felt that was what we would need if he lost his job for any length of time until he found a new one.

Over the years it has worked well for us. When the furnace broke or a washing machine, dryer, refrigerator, or stove bit the dust, we didn't have to panic, we knew we had the money to repair or replace them. If the car needed a major repair, we had the money. If a crisis hit, we didn't have to worry. Then we always faithfully replaced any money we spent.

We have been retired for so many years now and we still keep an emergency fund. It now pays for those emergencies that come up the same as it always has. But it has grown so large that we now not only pay what I call "crisis" bills from it but we pay cash for our new cars when we need one from it. Once we pay for a car, we save into it from our monthly retirement money to replace the car money back into the fund. After all cars only last so many years and then they need to be replaced especially when you live in a snow belt where cars rust like we do. 

Let me give you an example of what happened yesterday. I had a teeth cleaning appointment that had been rescheduled from when I was sick. I also knew that they had scheduled me time with the dentist because I broke a crown on my back tooth the Saturday before I took sick. 

So I had the cleaning and a full set of X rays that set me back $346. Then it was time to see the dentist about that broken tooth. The dentist had patched it twice for me since last September. I knew going there that it was just wasting money to do that again. So I was pretty sure the crown needed replacing. However I was not prepared for the 30 minute discussion that the dentist and I had. Since my last appointment, the crown on the other side of my mouth has developed a hairline crack. These crowns are 30 years old. Both of these crowns support my permanent bridge. Because they support the bridge, the bridge has to be removed, have the old glue cleaned out, and then be glued just to hold it in temporarily because it will have to come back out again after my new crowns are done and then be reinstalled with the bridges' rests being supported by those crowns.

In order to get the proper fit, molds have to be made of the crowns and bridge. They will then be sent out to the lab who originally made my bridge so that they can make the crowns to fit the bridge securely and perfectly. All of this work involves three appointments. One today, one on Thursday, and then one on February 16th. The lab needs two weeks to make the crowns. 

What could go wrong?  When the dentist removes the bridge today, it could break. I have a root canal in a tooth within that bridge. That could pull out or break. If the bridge breaks, I am looking at another $12,800. worth of work that I just paid for three years ago when I got the bridge. He thinks he can get it off with minimal damage or maybe none. I will know this afternoon. 

Anyhow, I asked him yesterday the cost of all of this- two crowns and the extra work because they support the bridge. He said it would be about $ 4000. which is payable as the work is done. So all of it would have to be paid by February 16th. I plan on paying it all today via my credit card to get the reward points. Between that, the $ 346. I paid yesterday, Hubby's cleaning last week and other things we have put on the card, we are almost up to getting $100. cash back again. When the bill comes every month we pay it in full. I just got my credit card bill yesterday so it will be a month before the bill comes and I can continue to earn interest on that $4,000. for another month. Plus I will get the rewards. That is how Hubby and I use credit cards.   

I scheduled the appointments and came home to tell Hubby. He said to me that is what our emergency fund is for and he was glad that I scheduled the appointments so quickly. He knows me and he knows I hate going to the dentist. So the sooner it is all over, the happier I will be.

Did we panic? No. Why not? Because we have our emergency fund. We will replace that money asap.

If you don't have an emergency fund for an expense like this, you would have to put it on a credit card and then pay interest while you pay it off. Then the next emergency comes and you put that on the card. That is how people get into so much credit card debt with no payoff in site. Pretty soon you are charging things that are not emergencies like dinners out, new clothing, etc. Yikes.

Is it easy to save for an emergency fund? For some yes, for others no. It wasn't easy for Hubby and I to save that first $10,000. on such a low income. But we did it because we knew it would pay off in the long run. It is the best thing we ever did. Because of it, we have never paid interest on a credit card. We have been able to get interest instead of paying interest. We have never had to worry when something like this dental repair happens. We are stress free.

So if you don't have an emergency fund start building it now. It will be the smartest thing you can do with your money. It will save you a fortune in your lifetime. If you take money out of it for a "crisis", pay it back asap. 

So while I am off to the dentist for my appointment today, Hubby will be cooking an almost 19 lb. turkey that I thawed. 


  1. Hello American Dreamer,

    I found your blog through Mrs. Rhonda's, "If You Do Stuff, Stuff Gets Done" blog.

    I must express to you, and your faithful readers, how RIGHT you are about an emergency fund being the most important fund. Like you said, using credit for emergencies only ends up compounding one's financial emergencies. Terrific advise and I hope your audience will take it to heart and discipline themselves to grow an emergency fund if they do not have one. Also, like you, I recommend at least one year's salary.

    I also hope your dental work goes well and you have a quick recovery.

    Blessings to you!

    1. Hi Mrs. B.,

      Thanks so much for sharing and for the good wishes.

  2. Ouch on the dental work. Do hope that the dentist is able to remove the bridge without any damage.
    Great suggestions about the emergency fund. So sorry about your husband's accident, I hope he recovered ok, and I'm glad that you had the emergency fund to help when he was recovering.
    It does give you some peace of mind.
    We did Dave Ramsey's financial peace university several years ago, and it helped us make an emergency fund and pay off our mortgage. Still staying debt free and saving as much as we can.

    1. Hi Kathy,

      Yeah on your emergency fund and paying off your mortgage. Staying debt free and saving as much as we can is what we do also.

      The dentist was able to remove the bridge without damage to the bridge. However a tooth that was in the bridge supporting it in the middle of my mouth broke at the gum line when the bridge came out. I had to have a root canal and post(to help support the bridge in that tooth) which cost me an extra $1428. today. The total cost of everything came to $5266. Yikes. But it was so necessary. It's all paid thanks to our emergency fund.

    2. oh my, I am so sorry. Hope you aren't in any pain. Sending hugs and prayers that you are feeling ok.

    3. Hi Kathy,

      I am just a bit sore this morning.

  3. This should be required reading for every high school senior (minus the dentist details, LOL).

    Heather near Atlanta

    1. Hi Heather,

      Thanks for the nice comment. I do believe that most people know about an emergency fund that read here. However a lot of young people who are just starting out may not and that is why I wrote about it. My audience is varied. However it never hurts to remind people.

  4. Hi AD this is Chris. You are so right about young people and emergency funds. When we were young, our parents did not tell us about them. It took a long time to know that we needed more than just a rainy day fund. I am trying to do better with our kids. Thanks for this.

    1. Hi Chris,

      I think it is wonderful that you are teaching your children.