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Money-Saving Mama: Emergency funds are necessary

Posted: November 12, 2013 - 5:13pm

We recently had a car breakdown and it made me think: What do people do to prepare for emergencies like this? It also made me realize that we had been preparing for it all along, to some degree, only we didn’t realize it.

Before you have an emergency, you need to prepare. The first thing you should do is set aside money in a fund. Dave Ramsey, and others, call it your “Emergency Fund.”

This is approximately $1,000 set aside just in case something happens. Realizing that taking extra funds out of your paycheck may not be an option, here are some options to help you achieve the goal. Sell some things. Look through your closet and see what doesn’t fit or you just don’t like or wear anymore. Get them out and sell them either at a consignment store, a garage sell or online. Go through your books, DVDs and CDs and sell them at a store such as 2nd and Charles, at a garage sale, or online.

Then go through your house. Are there things that just collect dust and you fuss about them every time you have to clean? Are there items you are not using and are tucked in a closet? Pull them out, dust them off and sell them either at a garage sale or online.

Even furniture can be sold at a garage sale, online at places like Craigslist, or at a consignment shop. Take all of that money and immediately put it in your fund.

Next, go through your typical day or week. If you go to the coffee shop on the way to work, make your coffee at home, but put the money you would have spent into the emergency fund.

If you use coupons at the grocery store, take the money you saved in coupons and put it in the emergency fund. Work an extra job if you are able and can. Even if it is walking dogs or cleaning houses, any extra amount is a help. The savings will start adding up quickly and before you know it, you will have your fund complete.

The next thing to work on is having people you trust who can work on major items such as your car, heat/AC, electrical, plumbing, and house.

This means scouting out and seeing who other people use and trust, who you may know that owns a business that you trust, or people you have been with for a long time that you already trust. Make a list of these people and keep it with you. When the emergency strikes, you will be able to look at your list and call them instead of panicking. Because you know them and have a rapport with them, you can rest easy that they are not going to charge you for things not done or needed and that they will keep the price fair.

One thing that helps is proper maintenance. With your vehicles, making sure that services are up-to-date on them is a must. If you can, get a service contract with your heat/AC company to have them check and clean your system once or twice a year. They could find potential problems ahead of time and fix them before the minor problems become major. There are many problems that can avoided, whether in the home or the auto, simply by maintenance and upkeep.

What happens, you ask, if an emergency happens and you don’t have these systems in place already? First, find a reputable person to work on your problem. Ask people you trust to find someone that they have worked with over the years. That is the best reference I can think of.

Go with your gut feeling, too. If you don’t feel comfortable with someone, don’t use them.

How do I pay for it if I don’t have my fund set up yet? Figure out the amount of the expense. If it is a $500 expense and you have $250 saved up in your fund, then you are halfway there. See if you can work out a deal with the person working on your item and pay them half now and half in a few weeks or a month, or maybe even three monthly installments.

There are many people who are willing to do this. If it is a small, privately owned place, the owner may be willing to barter with you.

As the last resort, use credit. This is the absolute last resort. If you do, every chance you get, use whatever extra money you have on hand and pay the bill off as quickly as possible. Then set up your fund again and get it fully funded as quickly as possible.

Starting now to prepare for an emergency will help make the emergency, when it happens, seem less of an emergency and more of just an annoyance.

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