One of the things I worked diligently on for the past 10 years was building up an emergency fund. Looking back at past memories of stressing over things like getting brakes for my vehicle, or taking care of that transmission problem fueled me into building up this fund. At first it didn’t seem possible as I was also on a mission to pay off all credit, and it was just small amounts here and there I would move into a savings account. As I progressively continued getting all those credit cards paid off and discovered more money at the end of the month because I don’t have to pay credit cards anymore I directed my approach on car payments. It took a long time, but I found myself in a place where I owed nothing except the mortgage. It was at this time I dedicated all extra money at the end of the month towards the goal of a $25,000.00 emergency fund.
With the emergency fund in place I moved towards paying off the mortgage. It took 10 long years to reach this goal, but today I can say that I am 100% debt free. No credit cards, no car payments and no mortgage. At 58 years old I find myself directing most of my earned income towards retirement and saving for a small house in a retirement village.
But, let’s go back to the emergency fund and why it’s so important. Last year our water heater died. The cost of replacement was $1,600.00 because it is situated on the second floor of our home. This cost staggered me at first as memories flooded my mind when I had to figure out how I would pay for it. But, I remembered that the reason I worked so hard at putting together an emergency fund was for reasons like this. I wrote a check and had a brand new water heater and could soon enjoy a nice hot shower. Then I simply started moving a few hundred dollars per month into the emergency fund to make sure it remained at $25,000.00.
It would seem that $25,000.00 is a lot of money to just sit in a savings account, but what this number represents is actually 8 months of lost wages due to losing a job, plus all bills associated to basic living for 8 months. In actuality it is my own personal insurance that provides a peace of mind. It sits there building up a little bit of interest like a good friend ready to take action if an emergency comes about. The funny thing is that those things I used to call emergencies I know call incidents. Life happens, there is no doubt about it and you never know when action must be taken to solve some of life’s problems.
You are an inspiration!
Crikey. I thought UK plumbers were rip off merchants but the US version makes them look like children when it comes to pure extortion.
Congratulations, that’s a great accomplishment!