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Showing Some Financial Grace…

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I wrote last week about my trailer dilemma and it appears as though more facts were needed.

1) We have 6 months in our emergency fund.
2) The trailer took 2 months of that, kicking us down to 4 months of emergency fund.
3) Once the old trailer is sold, those funds will be put immediately back into the emergency fund and kick it back to 6 months.
4) I never called this an emergency. I was trying to figure out how folks buy replacement vehicles without making a temporary dip into emergency funds.

Perhaps I didn’t lay it out correctly? I outlined the trailer purchase but the issue of car replacement will be the same. My husband drives a truck worth $10K. We will be upgrading to a $20K truck in a couple years. We will save $10K (plus extra for taxes/etc) and an extra $2K in case we overvalued his truck for a total savings of $12K. We will purchase a $20K truck leaving us $8K short. We were planning on short term borrowing from the emergency fund but we were blasted for that opinion.

Is it the general consensus that:
1) We save the extra $8K rather than consider the value of the truck?
2) Or purchase from a dealer (which would be more expensive than private sale) and trade our truck in and lose the money we would have made selling it ourselves?
3) Or take out a short-term loan from a bank and pay interest in an effort to keep cash in our account?
4) Or always wait until our vehicles are valued next to nothing prior to upgrading?
5) Or (I thought this was the most reasonable) attempt to work with one car and if needed, rent short term.

All in the name of risk mitigation?

Sadly, there isn’t a perfect answer. Hence the debate. I chose the one that made the most sense to me and kept the most money in my pocket long-term.

I was also surprised at how many people brought up the post about the puppy and expressed concern about my ability to identify a true emergency and my irresponsibility with finances. I’ve been debt free for 3 years. I have had a 6-month emergency fund for 2 years that I’ve never touched (I was able to pull the $100 in vet bills – a true emergency – from other areas of my budget because I’m extremely reluctant to touch it). I think it’s OK to say I wondered if pet replacement is an emergency during a period of deep sadness. I’m human. At what point am I not considered a total financial moron? Ten years debt free? 15?

I am revising my statement in that post from “I am making a stupid call on this…” to “I am making a calculated risk”.

A hearty thanks to those who didn’t beat me up for my decision. Thank you for extending grace. Thank you for understanding that not everything is black and white.

To all the others, I’m sorry if I seem harsh. I have the flu. I’m cranky. I’m working on thicker skin. I appreciate the exercise of looking at all the options…but let’s not throw the dog (something I never moved forward with) in my face. I’m still struggling with that loss.


15 Comments

  • Reply paige |

    This is a big reason why I’m not a fan of calling it an “emergency fund.” Truth is, we all need liquid, accessible money. We can use it for emergencies and other reasons when we need larger sums of cash. The balance will ebb and flow. To say we need some exact, arbitrary amount safely tied up for only certain purposes doesn’t seem very realistic. And who among us knows exactly how much our emergency will cost? Heaven forbid it takes seven months of expenses, and not six!

    • Reply Megan |

      Agreed. I think at some point, you can switch over to the idea of “savings” more than an emergency fund. Having available funds allows for flexibility which is part of the point of not being in debt to me. To be flexible enough to make your financial situation suit your lifestyle priorities.

  • Reply Angie |

    I think it’s the way you wrote it combined with the fact that most people writing for this blog consider $1,000 as an emergency fund. I don’t think anyone realized you had 6 months! After you have no debt and have you savings on autopilot, it’s not so important what specific account the money comes from as long as you have money to float the risk.

    I live on a 1 month buffer (about 5k) and try to keep 10k in cash as “emergency fund.” When I was first starting out it was a true emergency fund. But now, as I’ve saved more, it really is just and on-hand cash/opportunity fund. When we had to buy a vehicle we just took out the cash and bought it. We totaled the car and found a killer deal on a replacement before the insurance was paid out. So we just took out the cash and bought it. I wouldn’t have thought of this as my emergency fund. I also would not have waited until I had the insurance money “just because” that money technically was from the emergency fund. That’s silly. That’s games you have to play when you’re in debt. Not when you’re on stable ground.

    I mean, what’s the probability that you’d need to use the entirety of your emergency fund during the time you have two campers? I’d say pretty low. I think you’re fine.

  • Reply Christy |

    I think this is fine. We have like 20 savings account, because I like separating my money. We have $20,000 that we never touch. I guess you’d call that the emergency fund. Then we have a savings account for general savings, which goes up and down depending on what we need. But we’re debt free too, so I don’t stress about it too much. I know we can replace the money. And I’d much rather borrow from myself, than from a bank.

  • Reply Margann34 |

    Hi Beks, i would like to publicly apologize to you. I am sorry that I was harsh on you in my comments. The truth is, we only see bits a pieces of your financial picture. So we (readers) fill in the gaps with what we perceive to be your situation. Obviously, that can be totally off base. Knowing that you have a full 6 month emergency fund DOES completely change my outlook on the situation. I guess I was thinking that you were struggling with finances because that is where most BAD bloggers are at. Apparently, you are on a pretty strong financial foundation which is awesome. Good job! I will try to be more careful about making assumptions in the future.

    • Reply Beks |

      Sorry about my grumpiness! The flu makes everything seem so much worse!

      I really missed the mark on how much information I shared. I thought I clarified in the baby steps but judging from the responses, I wasn’t clear at all. It’s definitely a lesson for me.

      Apologies from me as well!!

  • Reply SG |

    Totally see where you are coming from with the car/trailer. 6 months is a great EF! What about now starting a mid-range fund for things such as trailer/car upgrade (I know you are saving for the next car already), trip, new pet, or anything “big” that comes up that isn’t a true emergency but a high level need/want. Kind of between regular savings and EF? I would think having a 5,000$ fund of that sort would give you enough of a slush fund to do those things without touching your EF. Hope you feel better soon!!

    • Reply Beks |

      This is a fantastic idea. I talked to my husband about it and he agrees! I think we’ll save a little ‘slush’ fund and use it for these situations.

  • Reply Joe |

    I think SGs suggestion is the way to go. At the end of the day, it comes down to how much of an emergency fund you are comfortable with as a bare minimum. If that number is truly 6 months of expenses, then you should hold the line there and save beyond that amount to conduct transactions such as the trailer, cars, etc. But that seems pretty conservative (although you have to factor in your individual situation, job stability etc). So spending down to 4 months for a short period seems fine. But then you should start calling the 4 month number the actual “emergency fund”. I think Dave Ramsey’s approach seems OK for folks who are just starting to implement some semblance of financial discipline, but seems woefully inadequate to cover a broad range of financial situations.
    The good news is that a wider variety of strategies becomes accessible once you are out of debt, and you no longer have the compounding interest accumulation over time hanging over your head!

  • Reply Lisa |

    I guess I don’t understand something. It may be a minor point, and I realize not the point of your post per se. But it’s confusing, and I hope you can clear it up for me. You’ve been debt free for 3 years — that’s AWESOME! And you’re back because, you’re not in debt? What is it we’re helping you blog away, or toward? That would really make a difference, I think, in how I interpret your posts. Thanks.

    • Reply Cwaltz |

      As I remember Beks and her husband still have a mortgage and their hope is to pay that down. Additionally some of us think it would be cool for someone who has blogged away their debt to talk about strategies that were successful for them on their journey and voiced that in her throwback post. So hopefully some of her posts incorporate what worked in the past when she’s addressing her present debt.

      • Reply Beks |

        Cwaltz – that’s exactly it! I haven’t been able to cover some of the strategies yet but I’ll get there soon!

So, what do you think ?