Another reason to have more than 1k in your Efund

vlagrl29 · May 2014

We took in DH's car to get his air conditioning fixed. It had stopped working towards the end of last year. Turns out he needed a new air compressor and it cost us $1,000. ughhh. I was not happy about that especially since we got our Efund right where I wanted it, so now we need to replenish it. DH was asking me what the purpose of an Efund is if you can never touch the money? I didn't want to use it and he didn't understand why

Oh well, at least we had the money right?

SmrBrd2012 · May 2014

Hmm...I don't think I'd really consider that an emergency unless you live in a really hot climate. I'd side with you with not using the e-fund! That's something that could be saved up for over time.

Keeptruckin · May 2014

Just think how stressed you could feel if you didn't have the EF! You can build it back up, that's why it's there. Even in cold Canada I would die without my AC lol!

hoffse · May 2014

We frequently use car repairs as an example of something you use an e-fund for.

When you have more than $1,000 in your e-fund, then tapping it for something like this seems entirely appropriate to me. You can either save for the A/C repair separately and be miserable on hot days until you've saved up (I know where I live, it's been in the 80's when I leave for work). Or you can use the e-fund for its intended purpose and then replenish your e-fund in the same amount of time it would have taken you to save for the A/C separately. Money is fungible, and one way or the other you are going to spend it.

I really view the e-fund as a way to help with cash flow issues so you can avoid a) being miserable and b) charging things to credit cards when stuff like this happens.

Xstatic3333 · May 2014

Ugh we had to replace that on H's car last year, right after we bought it (used) and right before our wedding. I feel your pain. It sort of scarred me against buying used again.

mana8503 · May 2014

Good use of efund in my book! I don't see a difference in saving for repair vs replenishing the efund. I'd rather have ac now and replenish efund.

lifeonthehill · May 2014

That sucks. I could live without the AC but I know H couldn't.

This just further reminds me I am so glad we modified the DR plan and did the 3--6 month living expenses in the middle of the debt snowball. I tried to convince H not to do it but now that it is done I am so thankful that it something were to happen we have a good amount of money saved.

cbee817 · May 2014

I feel like once you own a car, house, and have a kid, there should be at least 6 months of expenses saved somewhere. We had a huge sewer repair bill- $6,500 that needed to be be paid in full as soon as the job was done. We have 14 months of expenses saved and this repair wiped out everything we saved this year. But I'm glad we have the money because otherwise it would have gone on a credit card. About 2 weeks prior to that, DH took his car in and had $1,060 worth of repairs (transmission fluid leaking, oil pan cracked, and a few other things).

Just having $1,000 saved is ridiculous- maybe 20 years ago it would have been ok, but not today.

SmrBrd2012 · May 2014

Ok apparently I have a higher heat tolerance than most, lol. I end up shivering whenever the AC is on for awhile. And in May it's not really a concern yet where I live. I do agree that 1k is just not enough when you have a house or car. One of the few things in DR's plan that I don't agree with.

brij2006 · May 2014

Just playing devils advocate here......

If you follow DR's plan entirely, he would not consider this an emergency. It was a car repair that knew needed to happen and would therefore have been saved up for until it was needed. Same goes for things you know will need repaired in the near future, but can wait a little longer. So if you know you will need new tires before winter, then he would say to get pricing for it and put aside the amount of money each month to pay for it in cash before winter.

He also says for your car repair budget to be a larger amount each month and what you don't use to carry over from month to month. So we've been budgeting $150/month in car repairs since January, but have only used about $50/month. So technically there's now $400 in our "car repair fund" and we added another $150 this month, but only $50 will be used again. This way there's enough of a buffer saved up from month to month for any major repairs that may come up.

There's a lot more to his plan than just, "put $1,000 in your emergency fund and call it good."

hoffse · May 2014

I guess I don't understand the point of splitting it all out into 15 different "funds." I mean - if the repair costs $1,000, and you have $500 in a "car repair fund," $1,500 in a "vacation fund," and $1,000 in an "emergency fund" then you are still spending $1,000, and you will still be left with $2,000 across all "funds" at the end of the day.

Is it a self-control thing to keep it all separate? Why not just send all the savings to one or maybe two places? Does it matter what you call it, as long as the money is saved somewhere?

EDIT: If the A/C in my car went out today, it would be fixed tomorrow. When it's in the 80s-90s, and my car is parked in the sun all day, that does qualify as an "emergency." And again... since the cash is fungible, I would pay for it out of savings immediately and then replenish my savings over the amount of time it would take me to save for the A/C separately. It literally makes 0 difference financially.

brij2006 · May 2014

For DR's plan he has you saving up a little extra at the beginning of your snowball for car repairs, but you stop once there gets to be a good amount in it that you feel comfortable with. For us, that's $500. Then we will just budget in $50/month for oil changes, car wash, and random fluids we may need.

That is really the only category he has you truly setting aside money for. Just because it can be so unpredictable, and he understands that it can be discouraging to watch your Efund dwindle with one car repair.

*This is coming from someone who a year ago was anti DR's $1,000 Efund and thought it was nowhere near enough with being a homeowner and having a higher health insurance deductible. Now that we're following his plan 100% I completely understand and get how the $1k emergency fund makes sense.

jessica490 · May 2014

hoffse said:

I guess I don't understand the point of splitting it all out into 15 different "funds." I mean - if the repair costs $1,000, and you have $500 in a "car repair fund," $1,500 in a "vacation fund," and $1,000 in an "emergency fund" then you are still spending $1,000, and you will still be left with $2,000 across all "funds" at the end of the day.

Is it a self-control thing to keep it all separate? Why not just send all the savings to one or maybe two places? Does it matter what you call it, as long as the money is saved somewhere?

EDIT: If the A/C in my car went out today, it would be fixed tomorrow. When it's in the 80s-90s, and my car is parked in the sun all day, that does qualify as an "emergency." And again... since the cash is fungible, I would pay for it out of savings immediately and then replenish my savings over the amount of time it would take me to save for the A/C separately. It literally makes 0 difference financially.

this is how I feel about it as well.

vlagrl29 · May 2014

hoffse said:

I guess I don't understand the point of splitting it all out into 15 different "funds." I mean - if the repair costs $1,000, and you have $500 in a "car repair fund," $1,500 in a "vacation fund," and $1,000 in an "emergency fund" then you are still spending $1,000, and you will still be left with $2,000 across all "funds" at the end of the day.

Is it a self-control thing to keep it all separate? Why not just send all the savings to one or maybe two places? Does it matter what you call it, as long as the money is saved somewhere?

EDIT: If the A/C in my car went out today, it would be fixed tomorrow. When it's in the 80s-90s, and my car is parked in the sun all day, that does qualify as an "emergency." And again... since the cash is fungible, I would pay for it out of savings immediately and then replenish my savings over the amount of time it would take me to save for the A/C separately. It literally makes 0 difference financially.

I kinda feel the same way you do about DR. To me I'd rather have 1 account that would go towards unplanned things and also things such as medical bills and car repairs even if you knew about it 6 months ago. We had no idea what it would cost and this was the cheapest we could get it and he gave us a small discount. We are in the midwest and it was 87 yesterday. Today is humid, but not as hot and I still used my A/C. Air conditioning in our cars is very important and DH gets hotter more easy than I do. DD has the same heat tolerance as DH, she gets so hot and sweaty in the backseat even with air on.

vlagrl29 · May 2014

CHICK1250 said:

It's a pain in the butt, but it's good that you are able to get the repairs without stressing about the cost too much!

I'm taking my Jeep in to the dealer tomorrow, and I am completely uneducated when it comes to cars... the repair cost always takes me by surprise. But having the money set aside--regardless of which bucket it comes out of-- gives you some peace of mind! $1000 on an air compressor is something I'd be grumbling about if I had to put it on the credit card without the fund to pay it off. Kudos!

Everything is higher if you take it to the dealer. We finally found a good reputable place near us that my parents told me about. It's right next to an auto parts place, so they can get the repairs done in 1 day. DH called the Honda dealership to price match and they would have charged us $1200. This guy ended up only charging us $950, I'm using the term "only" very loosely

Xstatic3333 · May 2014

vlagrl29 said:

hoffse said:

I guess I don't understand the point of splitting it all out into 15 different "funds." I mean - if the repair costs $1,000, and you have $500 in a "car repair fund," $1,500 in a "vacation fund," and $1,000 in an "emergency fund" then you are still spending $1,000, and you will still be left with $2,000 across all "funds" at the end of the day.

Is it a self-control thing to keep it all separate? Why not just send all the savings to one or maybe two places? Does it matter what you call it, as long as the money is saved somewhere?

EDIT: If the A/C in my car went out today, it would be fixed tomorrow. When it's in the 80s-90s, and my car is parked in the sun all day, that does qualify as an "emergency." And again... since the cash is fungible, I would pay for it out of savings immediately and then replenish my savings over the amount of time it would take me to save for the A/C separately. It literally makes 0 difference financially.

I kinda feel the same way you do about DR. To me I'd rather have 1 account that would go towards unplanned things and also things such as medical bills and car repairs even if you knew about it 6 months ago. We had no idea what it would cost and this was the cheapest we could get it and he gave us a small discount. We are in the midwest and it was 87 yesterday. Today is humid, but not as hot and I still used my A/C. Air conditioning in our cars is very important and DH gets hotter more easy than I do. DD has the same heat tolerance as DH, she gets so hot and sweaty in the backseat even with air on.

I think it's a "whatever works for you" thing. I find separate accounts works well for us, especially since car repairs are sort of a "known impending annoyance" as opposed to an emergency. I have a long commute too, so they come up more frequently for me than probably for most. I like having a car repair fund, and I think I'll have a home repair fund too once we buy. Then our "e-fund" will just be for unexpected medical stuff, act of God disasters, and job loss.

Either way, I am glad to hear @brij2006 report that DR does allow for putting aside car repair money during the snowball. That makes the $1000 e-fund thing not quite as alarming to me, even though I still don't agree with it.

@vlagrl, glad you were able to get it fixed quickly!

vlagrl29 · May 2014

Also, thank god for all the gigs I've been booking. It will help us replenish it faster.

sillygoosegirl · May 2014

hoffse said:

I guess I don't understand the point of splitting it all out into 15 different "funds." I mean - if the repair costs $1,000, and you have $500 in a "car repair fund," $1,500 in a "vacation fund," and $1,000 in an "emergency fund" then you are still spending $1,000, and you will still be left with $2,000 across all "funds" at the end of the day.

Is it a self-control thing to keep it all separate? Why not just send all the savings to one or maybe two places? Does it matter what you call it, as long as the money is saved somewhere?

On the one hand, I agree with you. On the other hand, it can be easier to track with multiple accounts. Right now, we have the following savings accounts: e-fund, property taxes, travel, slush, and investments.

It used to all just be one savings account, and that was fine too... at least in theory. But, when it came to big purchases (well, travel) and getting on the same page with DH, it worked better to open a separate travel account. DH was fine with us spending $400/month on travel, but what I quickly learned was if I wanted that to include a $3000 for a trip to Europe at the end of the year, there was going to be some disagreement when it went time to buy the tickets, because by then, DH was "used to" seeing that money in the savings account and didn't want it spent on anything but an emergency or a house.

Now that we own a house, and opted not to have escrow, we have a property tax account, and a separate e-fund account, along with our general "slush fund" savings account. Could I just pay the $4000/year out of a generally savings account? Absolutely. Could I just pay for non-essential home improvement projects out of a general savings account? Yep. But as our financial lives have gotten more complicated, it's easier to just stick some of the money in another account if we know we are going to spend it a certain way on a future date. That way, when evaluating whether or not we can afford $X, I don't have to calculate whether or not after we spend $X, we will still have enough money in savings for an emergency, and for property taxes come October, and for the trip DH and I promised each other we would take.

But I also agree with you. DH and I were looking at our "post-baby" budget the other day, and it's gonna be tight. DH was all, "we can't stop saving!" So... yeah... I agree with him, but our budget still has savings in it, just not a general savings line item. It has $X/month for travel, it has $Y/month for home maintenance, $Z/month for retirement, $V/month for property taxes, and $W/month extra toward our mortgage principle. I wrote it out that way because we have a pretty good idea of how much we want/need to spend for travel, maintenance, and property taxes, and while we could save less for retirement or put less toward our mortgage, I don't see any point in making such a change unless we add a new savings goal or need to replenish our existing savings. But if I'd just put down 30% of our (post-baby take home) income to a "general savings" line item (that's just the portion for travel, maintenance, and property taxes), I think he would have told me that was way too much. When I add it up that way, it looks like we were still going to be saving a ton. It's hard to understand why we need to save so much without looking at the things we need to spend our savings on each year, I'd originally been planning on more like 10%-20%, but when I looked at what our savings was likely to need to cover, it became clear that wasn't going to be enough. (I am normally all for general savings too, but our hours aren't going to be reduced forever, and spending time with our baby was one of the things we've been saving up for... perhaps I should have opened an account for that too, so I wouldn't be arguing this point with DH, who totally agreed with me at the time we were putting the money away that this is what it was for!)

If there was a really expensive emergency, I'm sure we'd spend the money out of all the accounts, sell our stuff, go to mom and dad for a loan, open a home equity line, raid our retirement accounts, sell the house, sell a kidney, etc. But, obviously, I'm not planning on things getting that bad. We have money set aside for an emergency so that if something bad happens, most likely it will not put my kidney, or even my vacation, in danger.

Another reason to have more than 1k in your Efund

Re: Another reason to have more than 1k in your Efund

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