PROBLEM #32: How Can I Ensure that I Always Have a Little Something Set Aside for Emergencies (Peanut Butter or Otherwise)?
It was a lazy Saturday, around lunch-time. It was the time of the day when your stomach begins to remind you that you last ate a long 4 hours ago. This was my situation. Of course I started rummaging around the kitchen cupboards looking for something to eat. What I really wanted was a peanut butter and jelly sandwich. Within a few minutes, I found the bread, jelly, and of course peanut butter. I needed a sandwich fast to stave off the early stages of starvation.
Oh No! Was I in for a surprise when I opened the peanut butter? My son – who is old enough now to make his own sandwiches – had used almost all the remaining peanut butter. He, without thinking, put the basically empty jar back into the cabinet. He had left it so some other sucker would discover that the jar was empty. So now I had bread and jelly, but only enough peanut butter for a small corner of a sandwich. I had a peanut butter PROBLEM.
Then I remembered – we have another jar! Where was it? Back to rummaging through the cupboards. In the back of one of the cupboards I found it. The brand new unopened jar was beautiful to behold. There’s just something about sinking your knife into a fresh jar of peanut butter. I enjoyed my sandwich, and I made a mental note to add peanut butter to the grocery list.
Peanut Butter Emergency Fund
I had almost forgotten – we had a peanut butter emergency fund. It’s purpose – if we ran out of peanut butter before my wife could buy groceries – we could still enjoy peanut butter sandwiches. It made my tense situation bearable.
My wife had the foresight to realize that peanut butter was so popular at our house. If we ever ran out, it would be an emergency of epidemic proportions. She brilliantly purchased an extra jar – to be used only in cases of emergency.
How Do You Handle Financial Emergencies?
This peanut butter situation is a microcosm of many of our financial situations. When something unexpected comes up – a bill, or repair – how do you pay for it? Do you have an emergency fund to cover such expenses? If you don’t, you risk incurring debt to pay for those emergencies.
Maybe you have a large enough income and time to save up enough money in a short period. Certainly Bill Gates or Warren Buffet can cover emergencies that come up. And I would argue – even they have emergency funds. They just also have lots of other funds as well.
If you don’t have any savings set aside, I would urge you to carve a small amount out of your budget to deposit in a separate savings account (to be used in case of emergencies). Most Americans don’t have enough savings set aside to cover a $400 expense. This is outrageous.
Most experts recommend at least 3-6 months of expenses – not 3-6 months of income. It can take a while to build up to this, but one thing is for sure. You will never get there if you don’t START somewhere!
You need an emergency fund!!! A peanut butter emergency fund couldn’t hurt either.
Why You Need an Emergency Fund.
The money designated to be in your emergency fund is only to be used for an actual emergency. An emergency is an unexpected situation that requires a large amount of money to resolve. It is to protect your finances by keeping you out of debt. It is during emergencies that most people incur debilitating debt that cripples their financial future. Don’t be one of the statistics that takes on more debt just to fix your car.
Examples of Actual Emergencies
- leaky roof that needs to be fixed (check out this post on leaky roofs)
- medical procedure
- replace a large car part – engine or transmission – perhaps the car itself (replace with another car – pay cash)
- furnace, hot water heater, or refrigerator (check out this post on things you should only purchase once every 10 years)
- Christmas presents
- New deck, hot tub, hardwood floors – or other cosmetic/luxury home remodel
You need an emergency fund because it can offer incredible peace of mind – provided it’s there. Don’t spend it for things that are not real emergencies. It’s sometimes tempting to cash out your emergency fund to pay for something you think is necessary (like a new riding mower). I know the struggle. But I keep reminding myself – if I spend that money – it won’t be there if I have an actual emergency.
Look at it like insurance for your finances. Insurance that can keep you out of debt and provide some financial security.
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