As I’m writing this article I’m sitting at my kitchen table waiting for the plumber to arrive and install a new hot water heater in our laundry room.
The day before yesterday, I was running around the house cleaning up and getting everything ready for the holidays. We’re hosting Christmas dinner at our house this year and there are still plenty of things left to do before then.
My wife and I were in the in the kitchen with the kids getting ready to whip up some delicious oatmeal raison cookies when I realized the cookie sheets were still tucked away in the garage. As I cut through the laundry room to get to the garage I stepped in a puddle of water. Splash!
My first thought was that one of the kids had spilled something and neglected to clean it up, but I quickly realized there was way too much water on the floor to be a simple spill. Plus I could see the puddle growing and reaching towards the door to the kitchen.
As I grabbed some nearby towels to clean up the mess I realized that the water was coming from the hot water heater.
I knew immediately that it had rusted out and would need to be replaced. Oh boy! A nice hefty bill just in time for the holidays!
A $1,300 bill to be exact. Ouch.
It Pays to Be Prepared
Everyone faces some kind of unexpected expense from time to time. Maybe your car breaks down and needs a new transmission. Or maybe you get hit with some medical bills when your son falls off the swings and breaks a leg. Or maybe your water heater craps out like mine.
We all get hit with these kinds of unexpected expenses from time to time. So while there isn’t really anything you can do to avoid them altogether, you can do the next best things and prepare yourself for the inevitable.
Replacing our water heater for $1,300 was certainly not something I planned to do anytime soon, but fortunately I have an emergency fund set aside to cover unexpected expenses like this. I keep it in a high-yield savings account so all I had to do was transfer the money to my checking account and write out a check to cover the parts and labor.
Related: Emergency Fund Calculator
If I didn’t have an emergency fund I probably would have had to charge everything onto my credit card. In that case I’d just be stuck digging myself even deeper into debt and when you add in interest I’d be stuck paying way more than $1,300 in the long run.
To me, having an emergency fund is non-negotiable. Not only does it help protect me from unplanned expenses that could otherwise be financially catastrophic, but it also gives me peace of mind. Just knowing that I have some extra money set aside in case something goes wrong puts me at ease.
What about you? Do you have an emergency fund? How big is it? Where do you keep it?