3 Ways Having An Emergency Fund Has Made My Life Better | Frugality Magazine (2024)

As a frugal person who spends considerable time budgeting each month there are very few “surprise” expenses I encounter.

I plan early for Christmas and birthdays each year.

I have no debt.

My rent is predictable and I have arranged to pay a set amount for utility bills each month.

As a result you could result argue that there is very little need for an emergency fund.

But even in my current financial situation I still maintain an emergency fund.

Today I’d like to provide some reasons whyI still keep an emergency fund, and why I think they are an essential step in building a strong financial footing.

My Car

Regular readers will know that I have a strong dislike for new cars; statistics suggest that they lose 20% of their value the moment you drive them off the forecourt.

Infact, I don’t even buy “nice” cars – to me they’re an unnecessary luxury.

My car has one purpose – and one alone. It’s getting me from point A to point B.

At the moment 90% of my driving is commuting to and from work.

Much as many extreme frugalers like Mr Money Mustache tell us to dispense with our cars altogether it would simply be impossible (and just as expensive) to get to my rural office without it.

I’m not worried about looking “cool” or showing off to the neighbours.

If my car drives me reliably to work and back home then I’m happy. As a result I tend to drive old cars, and have rarely had any problems with them.

Rarely – but not never. The reality of driving an older car is that sooner or later something is going to stop working due to old age.

Over the last few years of my financial journey here are a few of the “surprise” expenses I’ve experienced as a result of driving an older car:

• Replacement starter motor
• New battery
• Replacement front tyres
• New gear linkage fitted
• Replacement wheel bearings

I should say that these expenses were spread over two different cars and represent roughly three years of wear and tear in cars that are 10+ years old.

Having worked out the math of what I’ve spent even on surprise repairs I’m still well ahead of all my friends driving shiny new cars.

But while none of these repairs was expensive on their own, I still had to stump up $100+ here and there – and at the drop of a hat.

Remember folks: no car = no work.

Any motoring repair therefore needs to be fixed immediately to not cause me problems.

Thanks to my emergency fund this has never been a problem.

Of course I would rather notspend that money (given the choice) but it is reassuring to have several months of living expenses in a readily-accessible account for just such emergencies.

Contrast this to the lady my mechanic was telling me about just before Christmas last year. She broke down, and was quoted just shy of $500 to get her car safe and roadworthy.

As it turned out she’d spent all her money on buying Christmas and had no emergency fund.

Apparently the poor lady was found sobbing away in the mechanic’s office trying to figure out where she could get the money needed.

The Replacement Car

Earlier on this year I had a minor accident in my car.

The road was wet and traffic was heavy.

Someone further down the queue slammed their brakes on, and as I did the same I skidded slowly but uncontrollably into the car infront.

The driver infront got off with nothing more than a minor scratch, but I managed to smash my headlight and buckle my bonnet.

A write-off I was reliably informed by three different mechanics.

As you’ll know from my earlier comments being without a car even for a day is a major issue for me.

Luckily once again my emergency fund came to the rescue.

Thanks to the funds ready for such situations I was able to go straight out that day and purchase a new car for cash.

Now don’t misunderstand – it’s not flashy or sexy – but it does get me to work.

A situation that could have been a major headache to other people was merely a minor inconvenience to me.

Within 24 hours I was back on the road again without concern.

Sleeping Better At Night

Thanks to these few situations in which an emergency fund saved my bacon I have found the biggest benefit of having an emergency fund is helping me to rest easier.

In my past life, weighed down with debt, struggling to make even the minimum payments, a surprise car repair (or purchase) would have driven me to sleepless nights.

Now, in contrast, there are very few everyday emergency expenses that I couldn’t cover.

That means financial security.

It also means that I feel far more at ease. Brown envelopes coming through the letterbox no longer bring me out in a cold sweat.

Conclusion

Re-reading this article it is easy to assume that I’m a bit smug about my emergency fund. About how well I have managed financially while other people struggle.

However it’s important to appreciate that just a few short years I wasone of those people. I know what it feels like to worry over every expense.

And so I don’t provide these stories out of arrogance – but rather to show just how beneficial having an emergency fund can really be.

If you don’t yet have an emergency fund of your own then I strongly advise you to consider starting to build one up as soon as possible; you’ll be amazed just how handy they really can be.