Fund Your Emergency Account

By: Jet Lee

Dave Ramsey is singing the advantages of having an emergency fund. Recently, I got to see the benefits for myself.

It's always great to have some cash on hand for emergencies. A few weeks ago, my spouse smashed the car. I found out several years ago that having a low collision deductible on your auto insurance isn't a smart financial move. Your annual premiums are much more expensive so if you don't have a claim every other year, you end up paying more in premiums over the long run.

Accordingly,Based on this premise I set the the deductible for collision on our auto-policy at a quite high $1000. Since the accident was judged to be no fault (of course, its hard to believe that my spouse couldn't see a 30 foot truck and sideswiped it), we're responsible for the whole $1000 deductible. Ouch!

So I dropped off the car at a body shop and picked up a rental for my spouse . Almost immediately after, I got into an accident myself, which I admit was entirely my fault. I've been driving for 10+ years and this was the first vehicular accident I've been in. Sadly that's another $1000 for the deductible expenses.Double Ouch!

We also got an surprizing $600 bill from the doctor for tests that my spouse's insurance wouldn't cover. Additionally, we had some more miscellaneous expenses that weren't expected.

In total, we were facing about $3000 worth of extra expenses in the past month. If we didn't have a sufficient emergency account, we'd be strapped for cash. Very much like those poor folks who need to access payday loans. It's always a good idea to have a couple of months worth of living expenses readily available in case of emergencies!

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The author maintains Living Off Dividends & Passive Income, a blog about investing and creating multiple streams of passive income.

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