Thursday, September 19, 2013

Telling the Truth: Is It an Emergency?

Or is it a predictable expense? Have you ever pulled out a credit card to pay for a brake job on your car and thought “this is an emergency?” Or called your parents to borrow money because your plumbing went out and you couldn’t pay for it? Or considered borrowing money from your 401k to attend the “destination wedding” of your best friend from college because it was an “emergency?”

Can we all agree? None of those things are emergencies! They are all predictable expenses. 

If you own a car, it will need brakes. If you own a home, you will have to hire a plumber. If you have friends, they’ll get married. (In fact, if you’re of “that age range” you might as well weave $500/month into your budget.) When we save for those things that we can predict, we can limit the emotional and financial upset that happens in our lives from “emergencies” to those things that are true emergencies.

And then there’s the life events we didn’t predict: you lost your job, you discover your plumbing problem wasn’t just a pipe, but your entire plumbing system needs to be replaced, your mom that lives alone across the country falls and breaks her hip and you have to go help, or you’re on vacation when a hurricane hits and you have to stay in a high-priced hotel for an extra 3 days. Those are all examples of true emergencies. They are all things that aren’t expected or predictable. And they are all things that could cost a significant amount of money.

What over the past 5 years have you unexpectedly had to pay more than 25% of your monthly income on? Was it an expense you could have predicted? Or was it truly an emergency? When we begin telling ourselves the truth about the difference between emergencies and all of those other “little” expenses that pop up and annoy us, but we know we’ll have, we can do a much better job of building our financial foundation.

-Stacey Powell

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