My mom once told me about a story called Mama’s Bank Account. If you’re not familiar with it, the story is based on a turn-of-the-(20th)-century immigrant family.
They barely get by, but somehow Mama has scraped together a small bank account. It’s a source of pride that, no matter how bad things get, they have a little money stashed away.
So whenever expenses reared up, Mama would offer to get the money from her account. And the rest of the family scrambled to find an alternative.
The twist is that there never was a bank account. Mama was smart enough to know that what the family needed was more about psychology than actual finances.
The story reminds us of two things. First, you can pretty much always find something to cut if you’re motivated enough. Second, sometimes finances are more about your state of mind than the state of your bank account.
So now we swing around to the rest of the post’s title.
We were hit with a $1,500 car repair bill. A lot of preventative maintenance that will avoid larger bills in the future (hoses, belts, mounts) and the actual item we needed repaired (power steering pump).
Ugh.
This comes at a particularly bad time because this month had only 20 workdays in it — and I took three of them off for FinCon 2012. Basically, we need most of Tim’s disability check to cover the shortfall.
The good news is that the repairs will be on the next statement, which gives us an extra month to build up a payment. That said, we still won’t have $1,500 by the middle of November.
None of this takes into account our emergency fund. It’s sitting at about $800, plus around $350 for the Christmas savings challenge.
So technically we do have the money. But that’s the thing: We have the money. And if we pay the bill, we won’t.
Of course, we also won’t have a $1,500 bill hanging over our head. But did I mention the part where we’d be draining our emergency fund yet again?
I know that EFs are there for this sort of situation. The most logical thing is to just take the money and throw it at the credit card next month.
But it’s incredibly disheartening to finally have something that you can actually call an emergency fund… only to drain it again. It starts to feel like we’ll never get ahead.
Then again, it’s stressful to have a balance on the card.
Then again, this month was an aberration. With our normal income, we can pay that balance off by December.
Then again, nothing’s a sure thing.
Then again… well, you get the point.
In the end, I think psychology is going to win out over financial logic. If this is what stresses me out least (out of a bad set of options), it’s probably worth $20-40 of interest.
And if the credit card still isn’t paid off by January, then we can throw the emergency fund at it.
Feel free to weigh in, folks. We’ve got another month before we have to make a decision.
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{ 6 comments… read them below or add one }
I actually have a savings/emergency account that Big Guy doesn't know about. Mainly because while *I* define an emergency as the roof caving in, the water heater blowing up, etc … *He* defines an emergency as "I think I need some hugely expensive and not strictly necessary part/accessory/thing for the truck".
My unemployed benefits end next week, and I'm still job-hunting. My "secret" account currently has three months' mortgage payments in it. If he knew about that account, it would be empty. Since he doesn't, he finds other ways to feed his truck parts addiction.
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Abigail Reply:
October 8th, 2012 at 1:54 pm
Brilliant! And I'm glad to hear it means some peace of mind for you in the coming months. Good luck with the job hunt — I know it can be brutal!
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Abigail Reply:
October 8th, 2012 at 1:54 pm
Brilliant! And I'm glad to hear it means some peace of mind for you in the coming months. Good luck with the job hunt — I know it can be brutal!
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At least you have the money. It's frustrating when it takes so long to save it and then it quickly gets taken away. I hear ya! Mama's bank account reminds me about a book called A Chair for My Mother by Vera B. WIlliams.
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This is interesting. And I've found it to be true for us as well. Any time we find we need to spend a large amount of money (whether it's an emergency or on a vacation), we pore over the options. I'm sure this psychology is also related to buyer's remorse.
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Abigail Reply:
October 9th, 2012 at 10:13 am
For vacations, I definitely don't want to drain the emergency fund. And I'll probably shudder to drain our regular savings account (once we, you know, have one). I think I'll probably end up creating ING subaccounts for every little goal we have!
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Abigail Reply:
October 9th, 2012 at 10:13 am
For vacations, I definitely don't want to drain the emergency fund. And I'll probably shudder to drain our regular savings account (once we, you know, have one). I think I'll probably end up creating ING subaccounts for every little goal we have!
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I think you're wise to have figured out that there's an emotional aspect to managing money, in addition to the strictly dollars and cents aspect. Unfortunately, decisions like this usually come down to "What will make me feel the least bad – depleting the EF, or having a credit card bill?". Maybe another way to look at it is which one are you more likely to attack over the next several months: paying off the credit card, or replenishing the emergency fund? Me? I'd probably put the car expense on the credit card, because I'd attack that sucker forthwith to minimize the interest I'd be paying. And I like having an emergency fund.
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Abigail Reply:
October 9th, 2012 at 9:18 pm
Carol, that's a good point. We all want a sturdy savings account, but we're a lot more frantic to pay down a credit card!
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Abigail Reply:
October 9th, 2012 at 9:18 pm
Carol, that's a good point. We all want a sturdy savings account, but we're a lot more frantic to pay down a credit card!
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I believe it was Eddie Fisher (can't remember where I read or heard this) who said, "I'm not poor, I'm broke." His philosophy: Broke was a temporary financial situation, poor is a state of mind.
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Mary Hunt has an interesting concept: an emergency fund, in case you part company with your income, and a second, specific set of funds for irregular expenses, like car repairs, big insurance premiums and property taxes. Each month, you put in one twelfth of the estimated irregular expenses, so you can leave your emergency funds for a crisis. I did this for years, and found it very helpful.
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