Friday, December 14, 2018

The bigger your emergency fund, the fewer your emergencies

A few weeks ago my parents were in town, allowing us to go on a rare date without kids. We weren't gone for very long, but it was long enough that my parents somehow broke our microwave beyond repair. They said it just started sparking and smoking, so they turned it off and waited until we got back. 

That microwave had already exceeded life expectancy (the sticker said it was made in 1996!) so it’s not anyone’s fault, but we immediately had an unplanned expense. For a few years now we've tossed the idea around of getting all new appliances but have always delayed since everything still works and some pieces would be very expensive to replace (double wall ovens are awesome, but not cheap). 

Ultimately we decided to only replace the microwave and were able to find a much better unit that still matched our other appliances and only cost around $200. I picked it up from the store and my wife installed it (the usual distribution of labor in our household), so we only had to struggle without a microwave for a single day.

As I've reflected on this 'emergency purchase', it has struck me how little it bothered me. We had plenty of money in the bank to cover a new microwave and could have paid cash for all new appliances had we felt the need to upgrade them all at once. 

We keep an emergency fund of cash for situations like this, but didn’t actually have to dip into it for this. The frequency of unplanned ‘emergencies’ isn’t truly any different if you have a big emergency fund or not. But having a nice cash cushion sure does make it so unplanned expenses have to be much larger to really be considered an emergency.

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