Advice on Using Emergency Fund to "Roll with the Punches"

I am new to YNAB, (since the start of COVID), and I am so very grateful to have discovered this life changing financial program!! 

Here are the punches that I am being hit with:

1. My 16 yr old vehicle needs shocks & struts and was given and estimate about $500. (In reality, I need a new car, but no where near able to pay a monthly car payment and higher insurance at this time).

2. My 16yr old dish washer (I purchased the car & the dishwasher the same year) finally gave out due to severe hard water. (In reality, I need a water softener system along with a new dish washer so that other household items/appliances/pipes do not get destroyed.  I am already having to replace one of the toilet handles every 3 months because they just disintegrate from the hard water)

I have an emergency fund of $2,000 in the bank and $1,000 "under the mattress".  I am in the process of learning to allocate funds to specific categories, but I am stuck in the mindset of saving for an emergency, but also not wanting to spending the emergency  money because I am not sure what really counts as an emergency.....if that makes any sense.  I feel that it has taken me so long to save the emergency money that I am afraid to see it disappear so quickly and then not have any money in case there is an emergency. ugh!

Not counting my mortgage (and a HELOC that I got stuck with from a divorce), I have a personal loan that is finally down to $2,500.

1. I was just going to use a credit card to pay for the auto maintenance, but should I use the emergency fund instead?

2. Should I hold off on getting a dishwasher & water softener until I can save up for it or use the emergency fund?

By the way what is the minimum amount I should keep in the emergency fund at all times while trying to save for the future?

I am hoping that some of you will have some amazing suggestions or advice that could help me decide on the best way to "roll with these punches."

Thank you

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  • Unanticipated expenses is why you have an emergency fund. If there is anything less important in your budget, then take that first (and obviously skip that spending). If not, then EF to the rescue.

    As far as a dishwasher, I grew up without one through college. It's a convenience in my view, not an emergency.

    Like 1
  • Sea Green Foal said:
    By the way what is the minimum amount I should keep in the emergency fund at all times while trying to save for the future?

    A lot of people ascribe to a $1000 EF when funds are tight, and they just hope it enough. Much depends on how likely the emergencies will be. Having other True Expense categories like Auto Repair, Medical Deductible, Auto Deductible, Income Replacement, etc. will cut down on (or even eliminate) the need for a generic EF.

    Like 1
  • dakinemaui said:
    Having other True Expense categories like Auto Repair, Medical Deductible, Auto Deductible, Income Replacement, etc. will cut down on (or even eliminate) the need for a generic EF.

    Because I have all of these categories, I don't have a generic EF. By having a specific home maintenance category, there is no need to feel "guilty" for spending it on home maintenance (though, I am like dakinemaui - a dishwasher is not a necessity for me; I usually only use it periodically to keep the hoses from breaking down and consider it more of a multilevel drying rack). I believe general advice for a home maintenance fund is to add 2% of the home value/year.

    But that's not where you are now - it's where you aiming to get through working the YNAB system. For the car, are you willing to take out a loan at XX.XX% interest (i.e. the credit card interest) to feel better about keeping the EF intact? That's how you should frame it. For the dishwasher, I personally would save up for it because there may be sales for Black Friday or Columbus Day. Also, my understanding is that availability for home appliances is pretty tight right now, so you won't have as many options. The water softener system seems like a long term investment that will overall extend the life of all of your plumbing and should definitely be researched for true costs and options. Armed with that information, you might feel more empowered to make a decision to spend from your EF on it.

    Like 1
  • Sea Green Foal said:
    I was just going to use a credit card to pay for the auto maintenance, but should I use the emergency fund instead?

    One thing to understand: the method of payment is a different question than "where does the money come from". Your question is better phrased, "should I use the EF or finance this?" You can use the credit card to pay (and I definitely would if it's a rewards card) regardless of which you choose.

    If you "use the EF", you would reallocate from your EF category to the Car Maintenance category. When you enter/import the CC transaction, that will be a budgeted purchase and the cash in the car category will automatically move over to the CC Payment category (reflecting your intent to pay off that debt).

    If you don't move funds from the EF (or anywhere else), the Car category will show yellow overspending. This is the warning you took on debt with no plan for repayment in place. In order to reduce debt in some later month, you would budget directly to the CC Payment category. The fact the debt came from this transaction is immaterial.

    Like 4
  • I personally wouldn’t touch my emergency fund for these expenses. I think that reflects that the concept of an emergency is different for everyone. 

    In fact, since there are now estimates, I would enter them as categories and put savings goals on them. How quickly you save would be dependant on how urgent they are. I know I could live without a dishwasher for a few months but definitely not a car. 
     

    I would also include categories for this long term expenses you’ve identified. 

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  • Thank you, Everyone, for your helpful advice and suggestions.

    I do think that the car is the most important and will most likely use a rewards cc to pay for the maintenance and then pull from my Emx Fund to pay off the card and then replenish the Emx Fund.

    I have seen on the news about appliances being on back order and having a small selection to choose from.  In thinking about it, I agree that a dishwasher is not an emergency and I can hand wash until I have saved enough to purchase one.  The water softener seems to be more important than the dishwasher and will create a category for each of those appliances.  However, I am thinking that after the car, I may have to use the cc for the water softener and use the Emx Fund to pay that off and then replenish again.

    I am slowly learning/realizing that if I simply create a budget category for each concern and start adding funds to them, then they become less of an emergency.  I get it now.  I see that I am going to be creating a lot of new categories now.

    Thank you again for all of your help.

     I am a single parent (47 yrs) who is having to deal with the finances for the first time and felt most comfortable asking here on this forum.

    Like 5
      • Yes I can
      • yesican2020
      • 2 mths ago
      • Reported - view

      Sea Green Foal yes sound like you've got it and this is a good choice in terms of the way forward. 

      You're in a great position to be able to pay for the repairs and the CC.   And then saving for a dishwasher...you go girl!

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  • Sea Green Foal said:
    I am slowly learning/realizing that if I simply create a budget category for each concern and start adding funds to them, then they become less of an emergency.

    Precisely. The sooner you start, the less of a hit per month you'll take. It's always difficult establishing the difference between now and later, so good luck in finding your particular satisfactory "blend".

    Like 2
  • One additional note: you should evaluate the softness of your water first. I've lived many places where the water is already quite soft, and people have softeners because they didn't know any better or were talked into them by a fast-talking salesperson.

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  • Following up on dakinemaui 's last comment, it's a good idea to have your water tested first anyway because the settings for the softener depend on the composition of your water.

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