Redefining Financial Emergencies


In 1990 I bought my first new car: a 1990 Mazda 323 Hatchback. It was an awesome car, you could fit anything in that hatchback. Naturally, I took out a five year car loan, because I thought that was the only way to get a good car.

Two and a half years into the payments I got up one morning and tried to start it. Nothing. And I mean nothing. I turned the key and got…silence. I had it towed to the mechanic in town and waited for the diagnosis. I can still hear his voice on the phone when he called and told me, “The cam shaft has seized into the cylinder head.” I didn’t know much about cars (and really, I still don’t), but I knew the word “seize” is synonymous with “dead engine” Indeed, that’s what it was, a dead engine.

This was devastating news. I had done every bit of recommended maintenance including an oil change every 3,000 miles. The estimate was well over $1,000.

And I didn’t have $1,000.

The warranty had run out. I couldn’t sell the car without a working engine and I still had two and a half years of payments left. I had to do the repair.

The problem was, I wasn’t budgeting. (Jesse was still in grade school so YNAB hadn’t even been invented yet!) I had no car repair money; I had no emergency fund.

Because I hadn’t prepared, this was an emergency. I did the only thing I could—I charged it on my credit card.

Fast Forward to Today

Credit card debt is what brought me to YNAB but since then, I’ve used the Four Rules. Today, my financial reality is very different. I have used Rule Two to build up a well-funded car repair category and a healthy emergency fund.

If my car needed the exact same repair today (let’s hope it doesn’t!), I would be disappointed for sure, but it wouldn’t be an emergency.

When you haven’t used Rule Two to prepare for larger, infrequent but inevitable expenses, pretty much every unexpected expense is an emergency. But when you have money set aside for those things? Almost nothing is an emergency. Financially, anyway.

Emergency Prevention aka Budgeting

Off the top of my head, I couldn’t think of the last time I tapped my emergency fund category. So, I went back and looked and what I found was really interesting.

In the past three years, I’ve pulled money from my emergency fund a handful of times.

Once was to help a friend. I could probably mitigate this a bit by adding more to my giving category.

I used some of it for technology stuff a few times. I needed a new computer battery and a new backup drive. Gosh, you know, I really should be budgeting for those expenses in my technology category. I should be planning for that kind of thing. I know it’s going to happen again.

Then I used it to purchase a GPS locator that I carry with me when I hike. I remember that was a last minute decision that year, but really it should have gone in my hiking category.

This exercise made me think: Why do I even have an emergency fund category? Why not just reassign the dollars to the appropriate category?

When it comes right down to it, my emergency fund category is for the things I can’t yet specify. Sure, I could probably do a better job prioritizing moving forward, and that’s something I’ll take away from this exercise. But since I lack the ability to predict the future, there will always be some things I didn’t see coming. That’s to be expected. My emergency fund is a pool of money I can go to when I don’t have quite enough in a specific category.

In fact, after reflecting on all of this, I think I’ll rename my category from “Emergency Fund” to “Emergency Prevention.” At the end of the day, that is the job those dollars are really doing.

And every time I need them and they are there, I’m so thankful for budgeting and Rule Two and peace of mind.