Dealing With Unexpected Expenses (Hint: You NEED an emergency fund)

FF_Tires$714.20! That’s how much new tires cost on my wife’s vehicle yesterday. Not too long ago we would have had to put the tires on the credit card and pay them off over time…a few years time. By then the tires would have cost over $800 when you add credit card interest.

Fortunately, we now have plenty of money set aside in a bank account for just such an occasion. No panic. No worries. Just a “What a bummer” and on with the day. We do still charge the expense on the credit card (don’t want to miss out on Discover Card’s cash back). The difference is we pay our card off in full every month so there’s never any interest.

The thing about unexpected expenses is…you kind of have to expect them. Maybe unplanned is a better word. Life is unpredictable. When it comes to a house, car, pets, kids or health—things break. And then they need repaired or replaced. And either solution costs money. Having a cushion of cash won’t protect you from everything life throws at you, but it does allow you more options.

A little trivia:

Talking about credit cards and automobiles got me all nostalgic. Becky and I bought our first car as a married couple on a credit card. We didn’t have any money saved up(in fact we were deep in debt as we worked our way through college). But we received one of those credit card offers for one year at 1.9% or something like that. The card had a limit of $5,000. When our only car(my first) broke down for good, our friends drove us to the Honda dealer and we picked out a car that we liked—and that was in the ballpark of our limit. The sales manager had to squeeze the card pretty tight to get the whole car plus taxes onto that card. And off we went…$5,000 deeper in debt with a used Honda Accord to get us to classes and jobs.

So glad we don’t have to squeeze purchases on to a credit card any more. After a lot of work and MANY lessons learned the hard way, we have a pile of money in the bank that we can use to cover the unexpected bills and also take advantage of unexpected opportunities (like the 2008-2009 stock market—but that’s another story).

One of the biggest money mistakes people make is not building an emergency fund. If you don’t have one, start today…buy a frozen pizza instead of takeout and put the $10 difference in a separate savings account. You’ll begin to taste financial freedom immediately.


  1. Thank you Nathan for being so aggressive about putting money aside for our family. Keep up the good work on your blog and may our personal finance stories help others!

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