Tuesday, June 28, 2011

Peace Of Mind Account

When Amy (my wife) and I first started our goal to pay off our debt, and not use credit cards anymore, we were admittedly scared.  We were not scared that we could not accomplish our goal, but scared of what would happen if our family had an emergency without access to credit cards.  During this time I learned a couple of things about the unspoken strife I had been causing in my marriage and what truly an emergency is.

A lot of financial gurus have many different names for saving money for a family emergency.  Dave Ramsey calls it an emergency fund ($1,000), but from my experience it goes deeper than just providing a way to pay for life's unsuspected challenges.  I like to call our savings for financial challenges a Peace of Mind Account.

When we started to clean up our financial mess I uncovered a point of angst for Amy in our marriage.  She did not feel protected financially.  This was due to my fly by the seat of my pants attitude in dealing with financial emergencies.  My response was "don't worry about it, I've got it", or "it will work it self out".  If those responses don't evoke confidence I don't know what does.  The truth is I didn't know what I was doing.  I was winging it, and that did not help Amy feel safe or protected financially.  Putting unexpected emergencies on credit cards was even worse for her anxiety.  Using the credit cards was prolonging and compounding the money we owed and created more uneasyness.  It was not until we decided to put a $1000 away for emergencies that Amy felt safe and protected.

An emergency is unforeseen,  something you can't plan or budget for.  An emergency is something that you can't do without.  An example would be our AC going out in the middle of the summer with my kids and Amy at home (This happened a couple of times).  A car accident, or hospital stay for an emergency surgery (No car accident, but one gallbladder situation).  We had plenty of things that we debated on whether or not they were an emergency (If there was a debate it really was not an emergency).  Some of those things were clothing, big screen TV replacement (I have two sons things get broken), computer (I really tried on this one), dish washer (yes the sink can still be used to wash dishes), new tires.  I know you are thinking that new tires might be considered an emergency, but they should be in your monthly budget since you know they will wear out eventually; but that is a post for another day.

The $1000 we had set aside for emergencies got used several times and had to be replenished each time.  The funny thing is that after each emergency we would not have another one till after we had put aside another $1000.  Yes we were blessed, but I would also argue that knowing what a true emergency was helped as well.  We also made sure all extra money was put toward the fund till it was replenished, that meant no eating out or extra purchases (Oh the horror!).  With the $1000 in the bank Amy felt safe, protected, and she ultimately had more confidence in me as a husband, which ultimately gave her a peace of mind.

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