Why you need an emergency fund

Remember how I swore that May was going to see a change in my spending habits? Well, it definitely will-- in a big way. Why?

Well, I found out on Thursday that my beloved '98 Neon would be unable to pass state inspection without about $2,000 worth of repair work on, well, pretty much everything. The cradle that holds up the drive train and engine had taken a nasty hit the last time I visited my parents (don't dig canyons in your driveways, people!) and that was smashed all to heck, and pretty much every belt in the engine was about shot, and the front struts and the rear brakes, and... yeah.

I have been employed for eight months. Fortunately, my first order of business after getting a paycheck had been to start shoveling money into an emergency/car replacement fund. I was hoping that I wouldn't have to replace the car for another couple of years or so, but I realized that I would have to start saving for that goal immediately. At the same time, I also had to start paying back my student loans from grad school, acquiring a professional wardrobe for work, outfitting my first real apartment, and, well, generally starting life without the benefit of a spouse's income or wedding gifts (note again how society screws the single folk). I'll let you take a stab at how much I had saved up. My tax refund helped in a huge way, but still.

I've spent the last four and a half days agonizing over my options: fix up my rattletrap bottom-o-the-line worn-out Dodge, buy a really cheap used car, finance a lightly-used car, or finance a new car. There are obviously pros and cons to all of these options (despite what they say, buying a new car isn't necessarily a bad idea-- who cares if the resale value plummets if you're just going to drive the car for 15 years until it dies, anyway, and hey, a 5-year warranty is nothing to dismiss lightly).

This morning I put money down on a 2000 Honda Civic that my parents found at a mechanic's they trust. I'll be pooling basically all of my resources from the car fund and my regular savings account and my latest paycheck to swing this, but I think I can do it without help. It'll be paid for in full and fully mine on Saturday. The fact that this car was within my cash ability is a miracle. The trustworthy mechanic and my parents all think that it should be reliable and last me several years. I am thankful... but I am also tapped out.

I am currently strategizing how I am going to swing this and still survive until May 31st (next payday). Fortunately I knew that I was going to be in these straights before April's paycheck ever hit the bank. Here is my plan:

1) Find out how much I am actually supposed to be paying on my student loans per month, and then pay that. I've been making about double payments up until now. 'Fraid I'll have to stick to the minimum for a few months to get a cash cushion built back.

2) Call my power company and tell them I want an actual reading this month, not an estimate. I get royally socked on the months they do an estimate, and this is not a month where I can afford to be overpaying them for an extra $30 worth of electricity that I didn't use. I can't wait until the next month's reading to get the overpayment credited on my bill. I need it in my checking account NOW.

3) Pay all of my fixed expenses (rent, student loan, tithe) immediately to reduce the amount of uncertainty as the month wears on. When you get down to $20 in the checking account, you need to know exactly what you have where and where it needs to go.

4) Buy a lot of ramen. My monthly grocery trip is almost due. I need to stock up on the cheap stuff and start digging into the frozen chicken and rice and ancient spaghetti (is year-and-a-half old spaghetti safe?) that I have stashed away. I will probably go to Wal-Mart instead of Shop 'n Save because they tend to be a bit cheaper.

5) Do free things-- go running (yeah for great weather!), go fishing with my grandfather (not free, but I'm not getting my $32 license fee back), read all of the books I've been accumulating (love that balcony!).

6) Drink the beer Althea gave me that she got for free (see her last post).

7) Tell my parents and grandparents that I am now collecting aluminum cans. I have heard of a place that pays 75 cents a pound for aluminum. I don't drink things in cans (except the free beer), but I can pick up trash and have relatives save their cans for me. It's pocket change, but every little bit helps.

I will need to get shorts this month, so hopefully Goodwill will come through. I will put it off as long as I can to get the truly necessary expenses paid first, though.

:) Suggestions welcome!