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This Would Be an Argument FOR an Emergency Fund

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Opening up my mailbox today resulted in a few more bills. All were expected, just one I wasn’t expecting to be so high. My new health insurance is through Blue Cross Blue Shield and I could have sworn once I started the policy and paid for the first two months, payment would then be required monthly.

No, that’s not the case. I need to pay for two month’s worth every two months.

A bill that I put aside $350 for has magically turned into $700. Ouch. If I had an emergency fund in place, this wouldn’t be a problem for I could “borrow” from it and pay it back the next month. But I don’t have one…I have chosen to pay off debt first (I do have $121 saved at Virtual Bank – but I do not really consider it an emergency fund at this point for the balance is low).

I technically have extra money in my account at the moment for home repair that I needed done. I have been leaving messages with the handiman but he hasn’t called me back. I know he ordered materials and the materials have come in, so now I feel like I’m stuck trying to get him to come out here to do the work! That’s another story in itself.

If I still can’t get a hold of the handiman, then I will have the money to cover it. If, for some reason, he finally calls me and comes to do the work, then things might get interesting at the end of the month. The bill is due February 1st and I won’t have enough income coming in to chip in the extra $350.

I’m sure things will work out. If worse comes to worse I will pay a few bills late that I can pay late without penalty and I believe I can pay the health insurance bill a little late without problems. My husband started a temporary side-job that should help. The first paycheck will arrive after the February 1st, though. I plan on calling Blue Cross Blue Shield to see if there is any way payment can be remitted monthly because shelling out $700 at a time is rough for a family with a highest regular bill of $323 (our mortgage).

In light of this happening, I have decided to have an emergency fund of $350 in place. I’m not mentally ready to do more at this point. I feel good about my online savings account at Virtual Bank so I will place my money there where it will earn above 4% interest. It looks like I will be able to fund it next month.

Going back to strategically planning what bills to pay on time is not fun. A small emergency fund will help keep that from happening again.


21 Comments

  • Reply Claire |

    Awwwwww, Amanda beat me to it!!!!! Wow, Tricia, you didn’t last long…but that’s what financial stress will do! πŸ™‚

    I’m sorry you’ve got this unexpected payment. Most experts say to fund an emergency account before hitting the debt real hard – otherwise, you’ll incur more debt when the emergencies (that are inevitable) come up.

    God bless you and your efforts to get out of debt. We’re right there with ya.

  • Reply Tricia |

    OMG – When I saw the comment saying that I said just, I couldn’t believe it! With reading my post again, I didn’t even find it! I had to do a “Find” to find it πŸ˜›

    No, it didn’t take long at all!!!

    Amanda, it’s a little late tonight. I’ll be in touch with you tomorrow about the certificate.

  • Reply mapgirl |

    I’m with Claire on the start an emergency fund before hitting the debt hard. I’ve been working towards that and it’s tough, but I do sleep better knowing that I won’t have to incure more debt if something happens.

  • Reply reggie |

    Tricia,

    Can’t you call them up and ask politly if u can make the payment in two month installments, thus 700/2 = 350 just for this time around.

    Don’t know about buisness in the USA, but here in The Netherlands
    they’ll be more than willing to extend the payment, if u call b4 the due date and explained the situation,
    wow beyond to you if u don’t call b4, depends on who u get on the phone, they’ll make it unnecessarly difficult..

    but my advise, give a call, u might probably get a lady with a soft voice on the line, that understands what it means getting out of debt, and will give u a chance for this time, topay the other 350,00 at the end of the next month.

    and at the same time, try to arrange, a monthly payment, or work some extra OverTime, to save a little 350.00 and pay it to Blue Cross, as advance payment, then u are always 350 ahead, so when a bad month hit u, u know u are covered for those 2 months, will u figure out how to get the advance paid back.

    btw, got your e-mail, just didn’t had time to read it through thourghly.

    sidi

  • Reply Amanda |

    I’ve paid our health insurance late many times with no penalty or cancellation. I think as long as it’s not over 30 days late you’re fine — but that may vary by state & company. Good luck!

  • Reply Tricia |

    I am going to try to call them. I know I saw the monthly billing somewhere, but now I am wondering if it was with paying your payment automatically (which I did send the info to do but it hasn’t started yet). I need to get clarification on my son being added to the policy as well. His state-sponsored insurance ended at the end of December and I sent the paperwork early December and haven’t heard back from them yet.

    As for the emergency fund, I guess I will do it in baby steps to fund it. It’s so hard to not put funds towards our debt. But, if I do it a little here and there (less the $250 contribution next month), I should have something significant by the end of the year.

  • Reply Tricia |

    Amanda – I emailed you to confirm your address. Please reply back and I’ll send the certificate. Thanks πŸ™‚

  • Reply EMF |

    Dave Ramsey recommends a $1000 “baby” emergency fund. I view it more as a margin to handle irregular cash flow issues such as you’re facing.

    My son got into trouble last year by not having enough margin in his checking account. He thought a deposit was credited on a certain when it was actually credited a day or so later. But he’d written a check on part of that money, so he had an overdraft. And the bank hit him with overdraft fees for that and every little debit card purchase, adding up to around $800.

  • Reply Maria |

    Tricia,
    I had a hard time building my Baby EF because I too wanted to aggressively hit my debt since I was on a new quest but knowing that it is there helps me sleep at nights.

    If it makes you feel better, call it a Contingency Fund or a Margin.

    I have noticed that “emergencies” have stopped jumping out of the shadows since I have my ‘contingency fund’ in place. Think of it as something that wards off evil spirits! LOL.

    Also, it allows you to know what it feels like to save and that can be its own reward!

    With as much as you are throwing at your debt, a contingency fund of $1K will be accumulated in about 1.5 months.

    Good luck!

  • Reply Jen |

    I have a “baby” emergency fund as well, and it’s working out nicely. I use it when I have to pay large, annual expenses like my car insurance, and for unexpected expenses like my recent root canal πŸ™ and upcoming crown. So I guess it’s a combo “baby” emergency fund and margin fund. My bigger emergency fund is more for when disaster strikes, like getting laid off or a major home repair.

    I fund the “baby” emergency fund with automatic deposits from my paycheck. So I don’t even think about it until I need to draw on it, or if it gets too big and I feel I should move some of it into my larger emergency fund, which earns a higher interest.

  • Reply Jen |

    Arg… I suffered from blog post confusion! :S The link I posted earlier was for your question about whether to contribute to the 401(k)… Not the emergency fund/no emergency fund question.

  • Reply Katie |

    Hi, just wanted to say I follow Mary Hunt’s plan (“Debt Proof Living” is her book) and she recommends creating a fairly large emergency fund before even tackling your debts. I know that I, and many of my friends, have attacked our debts, gotten them down and next thing you know big (or even lots of little) unexpected expenses pop up and next thing you know, you’re in debt again AND no savings.

    If you haven’t already, you should read her book – it has changed my life!

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