Emergency funds are important. Most financial advisers will tell you that before you start to invest, you probably should have about 3-6 months of emergency funds available. Dave Ramsey suggests that before you start to payoff your debts, you should establish $1000 in emergency funds. I generally tend to agree. You don’t really appreciate the value of having an emergency fund until you have an emergency. As life would have it, despite my plans for investing, unexpected expenses recently came up that I had to deal with. Having an emergency fund helped me to cope with life’s unexpected expenses. But I fear things will get worse before they get better.
The first thing I had to contend with was a reduction in my regular income. I’m getting about $1200 less per month. That’s a big cut in my paycheck. Although I should have anticipated that reduction based on the job I do, I didn’t. Truthfully, the $1200 per month in pay increase I enjoyed was always meant to be temporary. I just got used to that amount that I forgot that it had a naturally expiration date. Now, I really have to contend with living off of a $1200 reduction per month in income. I’m going to do everything I can to maintain my current level of investing, but that may have to be reduced out of necessity. They say necessity is the mother of invention. Well, I’ll find out how true that is in the weeks to come.
Increased Rental Expenses
Well, I don’t have a car right now, and that’s going to be true for the next couple of months. Therefore, I have to rent a car. Although I have a motorcycle, and can ride it to work on occasion, it is not very convenient. Also, more often than not, depending on what I have going on, I can’t even ride it to work. So, again, I rely on renting a car. Well, it just so happens that when I brought the car in to the rental company, they noticed damage on the vehicle. I was not in an accident or anything, and truthfully, I think that damage was there before I rented the car. But, I can’t prove it and so will have to eat the cost to fix the vehicle. I rented from Enterprise and got a 2017 Toyota Camry. I’m sure it’s going to be expensive to fix, but I am crossing my fingers that it will be less than the deductible. The back passenger side door had some scrapes on it, as if someone might have opened the door and damaged it. I don’t know.
I will find out on Monday what the cost is to repair the vehicle. I’m blaming no one but myself for not inspecting the vehicle with a fine tooth comb before I rented it. Lesson learned. Also, because I am going to be renting vehicles more often, I plan on just videotaping the condition of the car each time, just to avoid a repeat of discovered damage.
The one silver lining is that I found out that I have a collision damage waiver benefit on my credit cards. Basically, if I rented the vehicle using the credit card, which I did, the credit card will pay for the deductible. So, when all is said and done, I am hoping that my credit card will take care of the damage (if it’s less than my $500 deductible), and I won’t have anything on my car insurance. Because I’m moving out of the country again for work, I won’t be driving for another year or so. Therefore, I don’t have to worry about my driving record the next couple of years probably. So, even if the insurance had to take care of it, it’s no big deal. That’s what its there for.
Increased Living Expenses
To top it all off, I’m going to have increased living expenses. Right now, in my home, I have two roommates. The combination of their rents pay for the mortgage. However, one of my roommates will be moving out. So, I have to now be responsible for half the mortgage. My other roommate is leaving in July. So, come July, I’m going to be responsible for 100% of the mortgage. Now, I will be moving out too, so I’m going to have to rent the whole house. I plan on hiring a property manager. Although I think I live in a decent area and that my property should be rented fast. I’m going to prepare for the worse and be prepared to have a month or two vacancy.
Although my emergency fund was small, I was able to use it to this month to help stay afloat. I still have a small balance on my credit card, but it could have been worse. It could have been much worse.
Dividend Portfolio Commitment
I am invested for the long term. My goal is never to sell any stock in my dividend portfolio if I don’t have to. I aim to be invested for the next 20 years, and by then I still would not be 60 years old. Honestly, I would rather have a small amount of debt than to sell stocks in my portfolio. I say that because I know that if I use my credit card for example, I will be able to pay it off in a month or two at the latest. In my late 20s, I once had a portfolio. But, for whatever reason, I liquidated that account. I wish I never did that. But, as I’ve stated in the past, there’s no use crying over spilt milk. I plan on not repeating that mistake.
I can’t predict life. No one can. If something MAJOR happens. Then yes, I will liquidate my account. But barring a catastrophic event, I don’t see myself selling stocks in my portfolio. Although the portfolio is in a taxable account, I am treating it as if it were in my retirement account. I rarely look at the value in my 401k and IRA because it’s as if those accounts don’t really exists for me. I understand that I have liquidity and should be able access those funds in my portfolio if circumstances warrant. But, I don’t plan on that happening anytime soon.
Emergency Fund Conclusion
I encourage you to have an emergency fund. You never know when you’re going to need it. If you don’t have an emergency fund, then when an emergency hits, you may have to go back in debt. Although I had an emergency fund, technically, that fund has now been depleted. You’ll understand why I say technically in an upcoming post. What’s interesting about my situation is that all of these increased expenses are happening around the same time. I guess when it rains it pours. In any case, there is a reason while all the financial gurus claim that you should always have a sufficient and adequate emergency fund. Don’t be caught off guard.
Finally, if you have a credit card, you may want to double check ALL the benefits you have with that card. You may find out that you too have the collision damage waiver for rental vehicles. You may also find other benefits that you didn’t realize you had. I asked my credit card company to send me a list of benefits that I have. I won’t be guard off guard again.