Amanda's Money Coma III: Triumph Over Chaos

By Amanda Steinberg on Thursday December 03, 2009
This post is about saving


Amanda SteinbergThis post is the resolution to Amanda's Money Coma I and Amanda's Money Coma II.

When we last saw our protagonist (aka, moi), I had reduced $11,000 in unexpected bills down to $4,435.

Still, my husband and I had to resolve where that money would come from, as it exceed our monthly income. Our three best options:
  • A loan from a zero-interest credit card.
  • Withdrawing funds from our Home Equity Line of Credit ("HELOC")
  • Taking the money out of our emergency fund.
We find tapping our cash reserves to be stressful, and several discussions ensued.

Loan? Credit Card?
We ruled out the credit card as frivolous, and considered our HELOC. About $3,000 of what we owe is for new windows--a major home improvement (and a responsible use of home equity). Then again, in this climate, how could we justify borrowing even five bucks against our home?

Delay What You Can
We've also pushed off the $625 medical bill by contesting it with our insurance company. That buys us until at least January to find another source for that payment.

Cash Wins
So, as anxious as we felt tapping our savings account—that cushion is designated for a true crisis—we decided to use cash from our emergency savings. It's quicker, cheaper (no interest) and offers the least amount of hassle.

Bottom Line
Between credit cards, loans, and savings accounts, the scramble to find extra cash when you need it can be dizzying (and coma inducing).

I have my first New Year's resolution: a new savings account, separate from our emergency fund, solely for the inevitable and sometimes unexpected expenses life brings. DW financial experts suggest saving at least 5% of your income each month for these curve balls.

Will you join me?

Comments (23)add
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written by Einat , December 03, 2009
Thank you for sharing your story. You found a good resolution and shared a great lesson. You were lucky to have enough in emergency savings that some people may not, so it's good to know the other two (not as desirable) options.
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written by Miranda , December 03, 2009
Amanda, I understand your hesitation in taking the money from your emergency savings. My husband and I have an emergency savings and I always feel quite panicked when we have to take even a small portion of it out. Thank you for sharing your story.
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written by KateH , December 03, 2009
Glad you came to this solution. The only thing I would add is that you and your husband should "pay yourself back", perhaps by saving about 10% a month those first months to pay back your emergency fund while still creating your new emergency savings account.
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written by amanda , December 03, 2009
Hum, I never really thought about that. I always thought that the emergency fund was for things like you described, but now looking at it more I guess that makes sense to have another account separate just for the “curve ball” things. I’m going to talk to my husband about it, great idea!
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written by Aspiring Millionaire @ MyMillionairePlan.com , December 03, 2009
Amanda,

Thank you so much for sharing this. I don't know if I shared this with you, but I went through a similar experience recently. The only way to deal with this was to take out a loan on my retirement account. Here's more on my story: http://www.mymillionaireplan.c...-loan.html

Also Kiplingers Personal Finance recently recommended having savings accounts for different "curve ball" things. I have one for my car payment, one for gifts, etc.

Let me know what you think.

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written by Amanda Steinberg (DailyWorth founder) , December 03, 2009
@KateH - Totally, though, given how expensive our life is right now, just saving into our savings is a stretch. But, it's something to strive for. Another reason we need to find more ways to cut our spending. So maybe not 10%. Maybe 6.5%? :)
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written by betsy , December 03, 2009
These are good habits to create. And you'll get a tax rebate on the windows.
You're right to distinguish investments from straight expenditures.
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written by Allyson , December 03, 2009
I am new to your site and enjoy it very much. I wanted to write that I was concerned about your advice to "delay what you can." Was this particular bill something frivolous that needed to be contested or was it a valid charge and the contesting simply a stall tactic? If it was just a stall tactic then I find that action morally questionable. A valid debt needs to be repaid promptly, whether convenient for you or not. By stalling on paying valid debts you put undue pressure on the recipient to make up for your shortfall or poor planning. This is a truth many people seem to justify to themselves when dealing with large corporations, like your insurance company, but it can really be a burden for small and mid-sized companies (or sole proprietors). What would you think if one of your consulting clients pushed back on one of your bills even though they owed it, had the money in the bank but they didn't want to tap into quite yet? Just something to consider. Kudos to you for using cash though, that was a good choice!
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written by Amanda Steinberg (DailyWorth founder) , December 03, 2009
@Allyson - a health care related charge that should be covered by our insurance. Absolutely should and needs to be contested.

I agree, as a business owner, I believe in paying things promptly, as I depend on it with my customers.
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written by Lori , December 03, 2009
Its sooo funny that I read your post today because I had just decided that I would start putting $100 month away into such a fund - just for emergencies! Love your site.
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written by Allyson , December 03, 2009
Glad to hear it. We all know how much of a hassel it can be to get insurance companies to pay their part - I hope you win your battle with them!
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written by Marie , December 03, 2009
I set up an extra savings account separate from my “emergency account” last year. Seemed like a great idea, BUT I was not committed when it came to adding some money here and there to the account for those surprise bills or car repairs. So it really didn't do me any good (sometimes the thought doesn't count!). I'm definitely up to joining you in starting it up again. I think I am going to have quite the list of New Year's Resolutions for 2010! Thank you for the boost of encouragement I needed!
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written by dreamcatcher09 , December 03, 2009
I am really glad you and your mate were able to get through a stormy time. I hope to get some inspiration from you in getting out of debt. I have some major debt that I didn't get into by myself but am climbing out of by myself. So reading your sites it gives me inspiration. thank you.
Dreamcatcher
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written by anne Johnson , December 03, 2009
Thanks for sharing your story. It was interesting to read how you evaluated and moved through the process.
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written by christine baeza , December 03, 2009
Thanks for your honesty and openness. It is nice to hear another persons process @ challenges and it sounds like you and your husband took very intentional steps.
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written by Anne Marie Ferguson , December 03, 2009
I like that name! Curve Ball Fund! As I mentioned before Financial Recovery counselors refer to it as "periodic savings," or "life happens," but your name is much more descriptive!! I think you made a wise decision, as it truly was an emergency (although everyone has a different understanding of that word), and agree that it's important to repay that amount to a level you're comfortable with.
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written by @JillRussoFoster , December 04, 2009
I am a new reader and was pleased to see that you shared your own personal issues. Detailing your thought process and outcome was a great way for people to be in your shoes. Emergency savings (and other savings) are such a big part of peoples financial life and we all need to strive to have more saved.
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written by Laura , December 04, 2009
I'm so glad to hear you and your husband found a suitable solution! It was interesting to read about your process and try to apply it to my own life, as everyone has "curve balls" thrown their way from time to time. Since I started reading the different posts on Daily Worth, I have changed the way I look at and handle my own (even small) finances. Thank you!
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written by banannea , December 04, 2009
When I am faced with unexpected expenses such as the one you mentioned I plan; first I have three or four money stashes; emergency fund, savings, cash on hand, change jar, credit card etc so if I divide the amount by all these pockets of money, it is not so big of a hit on any one pocket of money.Alsof you can delay the payment[as mentioned] or pay a fraction etc;

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written by Pamela , December 04, 2009
Amanda, thank you for sharing your story. Your resolution of opening a separate savings account for unforseen events such as what you had seems a sound action plan. I also agree with Kateh. Paying yourself first is a good strategy to build your savings. In our advocacy program for financial literacy, we recommend to to go for saving 20% of your income. Out of this 20%, 60% is allocated to address your short terms goals (to include emergencies,etc) where you have easy access to your money while the remaining 40% is set aside for your long term goals. The latter is something that you can build on for a certain period of years until you decide or really need to use it. This way, your wealth accumulates over time. This might not be much for starters but you will be surprised as to how much this will total as it accumulates over the years.:-)
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written by Cara Marcano , December 07, 2009
I would like Amanda to write about how much is in her emergency fund for the family and how you come to this number, and also if her business has an emergency fund.... and how much should be in all of these funds...
that is how much cash do you need to have as a business owner on hand/
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written by Amanda Steinberg (DailyWorth founder) , December 07, 2009
Hi Cara, As much as I'd love to post my bank statements online to use as fodder for a lesson on what to and what not to do (seriously -- it wouldn't bother me -- I'm strange like that and would see huge learning value in it), I have to respect my family's desire for privacy and not share this detail. I will say, we have a few months in our personal account, and not enough in our business account. The business hasn't delayed a payroll since February, which is a vast improvement over years past, but is working on a reserve.
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written by ladydirector , January 25, 2010
It seems to me that the core of the issue was whether you considered this to be an "emergency" justifying using your emergency fund. I mean, you had the money but you were concerned about using your emergency stash for it, which I understand. What I don't understand is how adding more accounts is going to solve the problem--so now you have an "emergency" fund, a "semi-emergency" fund, and/or sub funds for "somewhat of an emergency related to car expenses", etc. At the end of the day isn't this the same as just upping your overall savings in the first place? And you will still have to make the decisions as to what qualifies as "emergency", "semi-emergency", etc. Seems like adding more accounts makes things unnecessarily complicated and at the end of the day you will still be reluctant to part with those savings.
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