These past few years have been rough on me. It seems like I’m just floating from one financial emergency to the next, and I’ve been struggling to get ahead of it.
I know that’s not what you usually hear from a finance blogger. It’s usually “I paid off my debt and you can too!” or “Stop being poor in four easy steps!”. But I’ve always prided myself on transparency, and I don’t think I could do that without disclosing the financial skeletons in my closet, how I got there and how I’m planning on recovering.
That skeleton is a mountain of credit card debt, and I got there through a series of financial emergencies.
What is a Financial Emergency?
A financial emergency is an unexpected expense. These are typically things you would use an emergency fund for if you have one, and rely on credit for if you don’t. Examples include a car repair, a home repair, a vet bill, or any number of things that lead you to spending money you weren’t prepared to spend.
Usually, a financial emergency involves a fairly large sum. How much that is different for everyone, but I wouldn’t consider an expense under $100 to be a financial emergency. Some might, and that’s okay. Each individual should decide what types of things constitute an emergency, and how to best prepare for those things.
What Were My Financial Emergencies?
Like I said, I had a ton of financial emergencies over the last two years. It seems like I had a huge expense or issue at least every few months since moving to Pennsylvania. And it was everything – home repairs, vet bills, car problems, rental house issues, medical bills, appliances – you name it, I had it.
Home Repairs Cost a Small Fortune
First was the leak in the upstairs bathroom. I didn’t realize that the pipes under the tub were cracked when I bought the house, but since it was already like that insurance wouldn’t cover it. That bathroom was dated and dirty, so I was planning on remodeling it anyway, but not anytime soon.
The best part is the way I discovered the leak. I wasn’t even using that bathroom, but as it turned out there was a giant blockage in the sewer line. Sewage ran all the way up that pipe, and leaked into the kitchen from the crack. A plumber and over a thousand dollars fixed the block but that ordeal made me realize that the bathroom was worse than I thought.
I wanted to do most of the remodel on my own, but I soon realized I didn’t have the skills. I paid my sister and her boyfriend to do the job instead of a contractor, but that still cost way more than I had anticipated spending.
The bathroom wasn’t the only problem. The heat stopped working on two separate occasions, and each time it cost me nearly a thousand dollars. The washing machine was broken even though the seller insisted it worked, so I had to purchase a new one as soon as I moved in. All in all, I probably spent close to fifteen thousand dollars trying to fix things in the house in the two years since I bought it. I expected some of the expenses (like the two-grand to repair the floor), but the rest were unexpected or more than I had bargained for.
Vet Bills Keep Coming
I know you expect to have a few vet bills when you own pets. And with 6 of the little guys, you should expect them fairly regularly. But I take good care of my babies, and I was not prepared to pay nearly seven thousand dollars in vet bills for them over the past two years.
First, Cleopatra had a problem. She was pooping blood. I took her to the vet, and they couldn’t find anything wrong, so they gave me de-wormer. All the tests cost me well over $600.
Everyone already knows about the next huge bill. Caesar’s accident cost me nearly four thousand dollars. It’s worth it, and I’d do it again in a heart-beat, but this was the financial emergency that truly started my decline. It’s hard to manage an unexpected bill to the tune of four thousand dollars.
But, that wasn’t the end of it. Coyote had ear infections, and Malaki’s blood work came back “abnormal”. Iris started peeing on the couch and all four were past due for their yearly check-ups. Five hundred dollars here, six hundred dollars there, and another nearly thousand dollars for the other. I love my babies, but they are expensive, and sometimes, especially when they are costing me this much money, I regret them.
Rental House Repairs
I recognize how much immense privilege I have to even have a rental property, so I know it’s odd to say that it caused a financial emergency, but it did, and continues to.
Most financial advisors recommend that you don’t delve into rental real estate unless you have enough cash on hand to handle the unexpected costs that often comes with it. This advice is so true, but unfortunately, I wasn’t able to follow it.
I didn’t actually intend to be a landlord. I moved to Pennsylvania for stupid reasons, and I couldn’t really afford to sell the house. After all the fees, I’d end up owing money even if I got a little more than I paid for from the sale. The best option was to rent it and try to gain some equity.
Being a Landlord is Expensive
I didn’t know how expensive that option could be. After my first renters moved out, I opted for a property management company. They are a lot less forgiving of small issues with the house than my friends had been. I had to get a new refrigerator, a new stove, and make some repairs before they would even consider finding a tenet. Two thousand dollars later, and we were ready.
Unfortunately, things don’t always work out. The air conditioning broke at the start of summer, and the tenets were incredibly upset that it took longer than they expected to fix. They opted to break the lease and move out early, and I had to pay even more money to get the carpets replaced, get the place cleaned again, and repaint the interior.
But the original contractors didn’t even properly fix the air. It stopped working again less than 45 days after the initial repair, which was only guaranteed for 30 days.
Luckily, I have a home warranty, which is paying for the majority of the repair costs. I’d be out nearly five thousand more dollars for these repairs if I didn’t have them. Instead I’m only paying two hundred dollars out of pocket (In addition to my yearly fee for the plan – which has more than paid for itself).
No list of financial emergencies would be complete without car repairs! My baby has over 130K thousand miles on her, and she’s still going strong, so you expect a few maintenance things every now and again. But I wasn’t prepared to pay nearly $1000 for an alignment adjustment and new tires, or to pay $700 for new rear light fixtures. Neither of these would have been big problems if not for the other financial emergencies I had been dealing with over the past few years, but when added with them, it becomes even more of a problem.
Luckily, I have good insurance and didn’t have to pay too much out of pocket in medical bills over the past two years. I had to go to the doctor a few times, once after I found out my ex was cheating on me, and once when I was super sick at the beginning of this year. All of the lab work, visit fees, test fees, prescriptions, etc. that I was responsible for after these two visits cost about a thousand dollars total.
Again, this emergency expense wouldn’t have been as detrimental if not for all the others ones, but when taken all together, they really add up to an expensive freaking few years.
What are the Effects of a Financial Emergency?
The effects of a financial emergency can range from being minimal to far reaching. A small financial emergency can cause a dent in your emergency fund, while a huge financial emergency (or a series of financial emergencies like I’ve been experiencing) can increase your debt, devastate your savings, and even lead to bankruptcy.
In my admittedly unprofessional opinion, Financial emergencies also leave psychological impacts. I’m a stressed-out ball of anxiety, partly because I’m always wondering what the next hit is going to be and when it’s coming. Digging out of the debt I’ve created seems almost insurmountable. Every time I get close to getting ahead of it, something else happens and all my progress is lost. Things like this can have a severe impact on someone’s emotional health.
How Do I Prepare for a Financial Emergency?
The best way to prepare for a financial emergency is with an emergency savings account. Start saving money from each paycheck so that you have cash available if an emergency crops up. Most experts recommend that you have three to six months of expenses saved in this account – that should help you make it through any single emergency that you might have.
It may seem as though you don’t have any extra to save, but that’s probably not true. Most people have a tiny bit of wiggle room in their budgets, even if it doesn’t seem like it. In order to find your wiggle room, first you will need to make a budget. Next, you will need to find ways to save money. Can you save money at the grocery store? Cut back on basic expenses? Use an app? Lower your utility bills?
If you need help saving money, check out Trim. It’s a virtual financial assistant that tracks your spending, helps you cancel old subscriptions, and automatically fights fees. Users have saved over $40 million dollars in total already by using this app. Find out what it can save you.
However, often times we don’t even have enough cash in our funds to cover all the unexpected expenses that pop up. I know I will probably get crucified for this in the financial community, but having a good credit score and a line of credit available is a godsend.
The emergencies I had over the past two years cost nearly thirty thousand dollars in total. How many people here have that much money saved in an emergency fund? I sure didn’t – and I still don’t. I had to rely on my credit cards to cover the difference.
In order to ensure that you have credit available, maintain a good credit score. You can do this by never cosigning anything for anyone and paying all your bills when they are due. If you have poor credit, you can apply for a starter credit card. These types of products are specifically designed to help people rebuild their credit.
How Can I Get Emergency Money Fast?
When you have an emergency, sometimes you just need money fast to pay for it. In situations like these, you can consider selling things you no longer need on Craigslist to get the cash, or even using a pawn shop. I don’t really like Pawn shops, but in a pinch, you have to do what you have to do.
Other ways to get money involve using credit. You can apply for a loan at places like Upstart, which offer competitive rates and take more into account than just your credit score. They are a great option with people who have fair credit and extenuating circumstances.
If your credit is poor, you can look into no credit check loans like cash advance services and payday loans. I don’t really recommend most of these options, as they generally have extremely high fees and interest rates, but if the heat breaks in the dead of winter and you have no other options, it can be a life saver. Please don’t use these unless you have no other options in a legitimate emergency.
Save Money Fast
There are tons of small ways you can save money fast – ranging from being smart at the grocery store to giving up your vices for a few weeks. These tactics may be enough to help you squeeze through an emergency with minimal impact to your credit.
Recovering from a Financial Emergency
I wish I could say that everything is good now – that I got all my financial chickens in order. Unfortunately, that’s not the case. I’m still digging out from this mess, and still terrified that another big hit is just around the corner. I’ve added nearly 10K in credit card debt to my name due to these emergencies. Because I was working to pay it off before the hits started coming, I now have over 15K worth of debt.
During the past two years, my entire focus had been paying it down. I was putting over 1K on it every single month. Doing that helped a lot – my debt could be nearly 30K right now if I had spent the money instead. But, it also limited me. I was so focused on paying the debt off that I neglected to rebuild my savings. Instead of charging each emergency, I could have dipped into an emergency fund.
Psychologically that’s hard for me. I’d much rather have money in my savings account and also have debt than have no savings and no debt. I have enough savings to pay off most of my credit card, but if I did that, I’d have no savings. Yes, I know, that’s what an emergency fund is for – but I can’t bring myself to do it. It’s not my emergency fund, it’s first year of FIRE fund, which I need to keep building.
Instead, I decided to start putting half my extra money towards the debt repayment, and the other half into a sinking fund that’s specifically designed to fix house problems and other things that pop up. This fund will be a checking account, so I won’t have to feel bad about taking money out of savings. There are already a few things I know that I will need to purchase out of this fund – paint and carpet for the upstairs is definitely first on the list. But I also want to have extra money in there for repairs to the house in Georgia, should something else crop up. My goal is to get five thousand dollars in that account while I pay off debt.
An Emergency vs an Expected Expense
I was not prepared for all of these financial emergencies. But the things is, I should have been. Not all of these things were exactly unexpected events. I should have had extra money set aside to fix the rental house, and I didn’t. I should have budgeted more money to prepare for the unexpected with my home renovations, but I didn’t. Because I didn’t do those things, they turned into financial emergencies. The purpose of the sinking fund is to help me fix that, to help me prepare for these expenses that I know will crop up, even though the “when” is questionable.
Financial Emergencies are always Looming
Things happen. Life happens. The next financial emergency will happen. It’s just a matter of when. The important thing is to be ready for it. Are you ready?
Melanie launched Partners in Fire in 2017 to document her quest for financial independence with a mix of finance, fun, and solving the world’s problems. She’s self educated in personal finance and passionate about fighting systematic problems that prevent others from achieving their own financial goals. She also loves travel, anthropology, gaming and her cats.