Are you prepared for an emergency?

I was running late and wanted to grab a shower before taking my middle daughter to school. I had just worked out and had a million errands to run. I needed to throw some laundry into the washer and run the dishwasher since we hadn’t run it overnight.  I started the shower and put my hand in to test the temperature. It was warm, not hot and I decided it was good enough. The water pressure was low, but it was expected.

My husband decided to go downstairs and change out the filter for our pump system and I went to go start the dishes.  The water pressure wasn’t getting any better. It should have improved significantly.  My husband called the company we use for our water filtration system and they said it probably wasn’t an issue with the filter… which meant it was our well. Our shallow 8ft well that was in the woods behind our house.

My husband called the person who services our well and he came out to have a look. Sure enough, we had a major problem. The line, between the well and the house, had a break in it and there was no way to know where that break was. It could end up posting us thousands of dollars to dig up the line and find the break and then repair it. Also, there was no telling where the line was – meaning it could be under our garage which had been built after the house.

I remember feeling panicked. This was going to be an expensive problem to fix and we needed it fixed.
As the cost estimates came in, it soon became evident that we were going to have to dig a new well. When all was said and done, our new well would end up costing us around $30K.

I don’t tell you this story because I want you to feel sorry for us. But, I tell you this story because I want you to know that I’ve been there. I have had that crazy expensive emergency come up when you least expect it. I have wondered how we were going to pay for it – but we were prepared and we were able to pay for it, even though we weren’t sure at first.

Emergencies happen.

Are you prepared? Do you have money put aside for the day your hot water heater breaks? For the day you wreck your car? For the day your husband loses his job? 
Dave Ramsey recommends that you put $1000 away in a savings account for the inevitable emergency that will come up the minute you decide to pay off your debt. And then once you have paid your debt off in full (other than your mortgage) put 3-6 months worth of expenses away for emergencies that arise in the future. Suze Orman actually recommends putting 9 months worth of expenses away for emergencies.

This money needs to be liquid. It needs to be ready and waiting and it needs to be available so that when that emergency arises you have it and can pay for what you need to pay for.  However, that emergency fund is meant for emergencies. How do you figure out what an emergency is?

There are 3 questions you should ask yourself in order to determine what an emergency is:

  1. Is it unexpected?
  2. Is it necessary?
  3. Is it urgent?

If you answer yes to these 3 questions than you have an emergency. There are unexpected expenses that come up that are not emergencies. There are necessary expenses that are not unexpected or urgent. And there are urgent expenses that are not unexpected.

Any time an unexpected financial hit comes, it may feel like an emergency, but you need to ask yourself if it truly qualifies. Is it something you can save for? Is it something you can wait for?  Emergencies are a part of life. It is important to be prepared. Are you?

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