I know that those two words don’t usually go together. You may have even thought that I just left the ‘d’ off of the last word. But I actually want to talk about emergency fun. Not that emergencies are ever fun. If you have prepared properly, though, there can be a real element of fun, especially after the emergency has past and you are looking back. There is even fun to be found when there is not an emergency if you are prepared for when there is.
I guess first I should clarify. I think that saving money is fun. If I have outsmarted the foreseeable downturns in life, or jumped across pitfalls that ensnare others, or even just get a great deal on something that I had to buy anyway I think that it is fun.
This Fun Begins With a Fund
Hopefully you already understand the absolutely crucial nature of an emergency fund. There aren’t many things that are more critical to success in personal finances and financial planning than a sufficient emergency fund. Perhaps if there is interest I will write an entry just on this. Suffice it to say that right now a good emergency fund is a number one priority in any financial plan.
So where is the fun in that? The fun begins after you have the fund. Once you have the money in place you can sit back and watch the fun begin in all the ways that you can save money.
A Few Morsels to Whet Your Appetite
Here are a few of the ways that you can save money by having an emergency fund. These, and numerous other ways can add up to a significant amount and can more than offset the lower interest rate that you earn by keeping this money liquid.
Home and Auto Insurance
Give your insurance company a call and ask what the difference in your premiums would be if you increase the deductible to the maximum amount that they allow. Add up the savings. Usually the difference in premium makes up for the increased deductible in a short amount of time. And you have more than enough sitting in your emergency fund to pay the deductible should you need to. Also, if you are paying monthly find out how much less it would cost to pay once per year. The difference can be as much as 20%! Pay the premium from your emergency fund the first year and then pay yourself back monthly, plus enough to pay next year’s premium.
Here is a similar principle. However, the savings in premiums for a higher deductible plan can be much more substantial than with home and auto. Be sure to check out my article on Heath Savings Accounts to see how much money you could really save.
Now here is an interesting one. If you have a healthy emergency fund (3-6 months, or more) you have much more flexibility in your employment. If you are not happy with the job, the circumstances that you are placed in, or the pay, you are free to ask for something better. The worst that could happen is that you need to find a new job and you conceivably have 3-6 months to do that without a problem. Or what if you get fired? You can smile and not wonder how you will feed your family. Or, what if you have been working on a side business and you are ready to take it to the next level. You have the ability to do so much more than you otherwise would without substantially increasing your risk.
A Major Repair
In this case you have the ability to find the best deal because you can pay with cash. Also, you don’t have to use a credit card. Just add up the savings in interest that you would have paid on a credit card, plus the better price you negotiated for paying in cash and you will really be having fun.
I have a lot of others. In fact I have held back some of my favorite ones. I want you to think of the fun that you can have and the savings that you can achieve by having a well funded emergency fund. And then I want you to send me your ideas. Even better, send me your real experiences. I will put my favorites in a future entry.
* This article is commentary on basic principles. In no way should the things said in the article be construed or interpreted to be advice for your specific situation. Before making any financial decision you should consider all factors and consult with a professional.