Nov 14th, 2012 by Jennifer Lynn
The cash portion of our family emergency fund, anyway, has nearly been wiped out…
Are you in danger of being wiped out?
… and quite honestly, it blows. M. took his car in for inspection and the word came back yesterday: we are facing close to $2,000 worth of car repairs.
However, I keep reminding myself that the entire purpose of an ‘emergency fund’ is to be used when needed, and not to feel discouraged. Frankly I hate spending money on anything that doesn’t appreciate in value so it is totally aggravating when a vehicle is chewing away at such a huge chunk of our family savings. Unfortunately, a car is a necessary evil for our current situation and there is just no way to maneuver around these expenses right now.
Thankfully we can pay this bill off immediately, and the plan is to plop these unexpected repairs onto my rewards credit card and pay the balance off in full, to maximize my rewards potential.
The cash is readily available—usually I will accrue a highly liquid stash in order to pounce on investment opportunities on items at local estate sales, and such.
The advantage of credit cards and being able to tap into a line of credit
Let’s say, however, I did not have access to immediate cash to pay for these car repairs, and the mechanic is demanding payment by tomorrow. Here is another huge benefit to a credit card—I could use my available line of credit through my card to float the cost of repairs until I was able to sell (liquidate) some of my investments, and then pay off the balance in full.
This is why a lot of folks eschew an ‘emergency’ savings account, as they would rather not tie up large balances in a conservative account with paltry interest rates. This type of strategy, however, requires excellent credit and discipline.
I can not reiterate enough the importance and good financial sense of accumulating savings. Little bits add up and really do matter. It can mean the difference between dodging scanty annoyances and experiencing complete financial wipe-out.
Our family savings cushioned us from what may otherwise have been a hefty and dire financial pounding; instead, this car situation is just a minor nuisance.
Time to bravely soldier on.