Last year, readers Mitch and Jenn had a string of bad luck. Mitch broke his leg in a skiing accident. Jenn's car broke down requiring major repairs. And their home's aged roof decided to fail right in the midst of a major storm.
The timing for all of this wasn't ideal: three weeks before Christmas. The financial and emotional tolls were huge, but nothing like they might have been if these folks hadn't been diligently building their Contingency Fund: a pool of money every family needs when facing a dire emergency.
Mitch's health insurance covered most of the costs of his surgery and follow-up therapy. Still they had to come up with more than $2,400 to cover his deductible, co-pays and prescriptions.
The car repairs were just shy of $2,700 — not surprising, given their Subaru's age and 140,000 miles.
It was the roof that really threw them for a loop. The estimate to repair it — with no assurance that said repairs would last for longer than a few months — was $750, with a new roof coming in at $12,000. Because the roof was so old and failed because of its age, not because of the storm, their claim was denied.
Suddenly, their healthy $18,000 Contingency Fund (CF) didn't look quite as massive as it had only days earlier.
All of these financial emergencies were of top priority. None could be ignored.
The medical bills and car repairs reduced Mitch and Jenn's CF to about $12,500. They opted to go for the roof repair of $750 to buy themselves time to save for a new roof.
So far the roof repairs are holding well. They've had time to get additional estimates, and it looks like the cost will be closer to $10,000, which, given the circumstances, comes as good news.
Mitch and Jenn are crash=saving so that when they replace the roof this summer, the cost will not deplete their CF. And they're committed to continue saving like that to restore their CF back to $18,000 by year's end.
Now, I'm going to predict what the majority of readers are thinking: Sure, Mitch and Jenn are wealthy, so of course they have money to save. Or: They're lucky because they have two incomes; we have only one. Or: Must be nice, but what about those of us who are unemployed, unhealthy, deeply in debt or (insert excuse of choice here)? Trust me on this: You are not alone in thinking you do not have enough money to save some of it.
A recent study by the Credit Union National Association revealed that only 43 percent of women overall reported having an emergency fund compared with 63 percent of men. The gap was even wider between women and men age 55 to 64. Just 58 percent of women in that age group had an emergency fund, while 82 percent of men did.
I find this disturbing. Emergency savings are especially critical in your 50s or 60s, when life can really throw you a curveball, from losing a job to unforeseen home repairs.
As long as you see building your Contingency Fund as optional, there will always be something more pressing to take priority.
You must stop seeing this as something optional. Financial emergencies are coming at you, you can count on that, and you'd better believe they'll arrive sooner than later.
Start small. While you need a big, healthy Contingency Fund (equal to at least six months' living expenses), do not focus on that big number. Start by saving $500. Then set your goal to make it $1,000. Now you're on your way. You're catching the savings bug. Soon you will reach $2,500. Then $5,000 will be in view.
Get started. Soon you'll discover that worry-free is the way to be.
Mary invites questions, comments and tips at [email protected], or c/o Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website and the author of "Debt-Proof Living," released in 2014. To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.
Photo credit: Carol VanHook