Recently we got a bit of a shocker to our budget. The washing machine, out of nowhere, decided to give up on us. I can’t say I’m totally shocked; the poor thing was thirteen years old, after all. But still, it gave no warning before deciding to conk out completely. Turns out that the motor is shot. There is no way to repair the motor so the only choices are to get a new motor or a new machine. This was certainly an unexpected expense so we had to employ all of our good decision making practices to deal with this little problem.
First, we looked into the cost of replacing the motor. That seemed to be the least expensive and wasteful route, at first. Turns out that replacing the motor costs almost as much as buying a new machine (it was about $80 less for the motor than a new, middle grade machine). Since there’s not much to a washing machine, replacing the motor would probably buy us many more years of use. However, the newer machines are about 50% more efficient than what we currently have (which was the cheap, contractor special installed by the builder). A new machine would use a lot less water and electricity. We crunched the numbers and decided that a newer machine made better overall economic sense, given that we would recoup the difference between repair and replacement with energy and water savings.
We had the money to replace the machine in savings so it was not going to be a big deal to pay for the machine, but we still wanted to make certain we got the best deal we could. Rather than rushing out to buy a new washer, I took our clothes to the laundromat for a few days while we researched models and prices. It took about a week to decide what we wanted and which retailer had the best price. When we got to the retailer, we lucked out because they had a dented washer selling for $200 less than the pristine model. The dent was on the side that faces the wall and not very big to boot, so I really didn’t care and took the $200 discount. We opted to take it home and install it ourselves, saving the delivery fee. The old one went to a local charity (they picked it up for free) that uses old appliances for vocational training.
In order to replenish our emergency fund for the next time (and there will always be a next time) we immediately reduced spending in some other budget categories like eating out and entertainment until we recouped the cost. Even though we are able to avoid debt when an unexpected expense comes up, we are quick to replace that fund so we don’t have to take on debt in the future. Too many emergencies that drain your fund without replacing what is lost leads to debt eventually.
For us, this unexpected expense was no big deal. An inconvenience, but not a budget buster. We employed all of our best decision making and savings tactics to make certain that this expense didn’t do any more damage to our emergency account than absolutely necessary. Earlier in our marriage, things like this threw us into a tizzy because we hadn’t yet build up enough of a cushion to really cover things like this. We used to sweat every unexpected expense, pulling money from one budget category to another and really juggling our books to get through without taking on debt. Sometimes, we had to put a purchase off and deal with some inconvenience until we could save the money for the item. But by making wise purchasing decisions, not buying more than we needed, deferring purchases that weren’t really necessary, and not panicking, we were always able to manage. Here’s our quick guide to dealing with unexpected expenses without incurring debt:
Always keep an emergency fund in place to cover unexpected expenses.: Otherwise, you’ll have to turn to credit. This is the single most important thing we do to deal with unexpected expenses and remain debt free and it has saved us more times than I can count.
Research the most cost effective option, taking into account not just the base price of the item, but other “hidden” costs as well such as energy costs, the likelihood of additional repairs, labor if it has to be installed, etc. Look into used items, if applicable. Crunch the numbers to determine the best approach, rather than assuming you have to buy a whole new item.
Don’t rush to buy the first thing you see: In most cases, you can get buy for a few days with alternatives or temporary repairs, giving you a chance to find the best price or negotiate a good deal. If it’s a medical expense and not a life threatening emergency, shop around with various professionals and look into smaller towns. Sometimes there is a big difference in what medical providers charge for the same services. (Example: Early in our marriage my husband had to get a root canal and other dental work. The cost his dentist quoted was $1,500. But by going to a dentist in the small town next to our larger city, he was able to get the same work done for $750, saving us a lot of budgetary pain.)
Reduce other expenses immediately until the emergency fund recovers from the expense.
Don’t panic: Most unexpected expenses are not emergencies that have to be dealt with right now. You can live without a heater or AC for a couple of days, you can cover a leaky roof with a tarp, and you can find ways to get around the use of most appliances. Unless it’s a medical emergency, you have time to find a decent deal, compare quotes, determine your needs so you don’t buy more than you need, and crunch the numbers to work in your favor.
Don’t buy more than you need.: If the washer breaks, you don’t have to get a new dryer, too. You also don’t have to buy something with all the bells and whistles if you don’t need them. Just get what you need and move on.
Think about deferring the expense until you’ve saved up enough to pay cash: Things like a leaky roof or a refrigerator have to be replaced immediately. But other things, like washers, dryers, or heating and AC units may be able to wait. You can buy a drying rack or clothesline or take your clothes to the laundromat. You can buy a space heater, use a fireplace or buy some fans to get you through the loss of climate control. You can carpool or take public transit if your car dies. It may not be the standard of living you’re accustomed to, but it will buy you time to save the money and avoid taking on debt.
It helps to think ahead: I generally keep an eye on appliance trends and prices, contractors in the area that are reputable and fairly priced, and I know what my health insurance covers at which providers and how much. I don’t spend a lot of time learning these things, they’re just things I pay attention to when I’m out and about, talking to friends who are having work done, or when insurance policies come in the mail. That way, when emergency strikes I’m better able to make decisions. I know where to go, who to talk to and what to look for to deal with the problem. It helps me keep a clear head and it prevents regrettable, rash decisions.
Sometimes, particularly for medical emergencies or things that will lead to larger damages if not dealt with immediately (like leaky roofs), you may have to simply do the best you can with limited knowledge and research time. You may not have time to search for deals and low cost providers. You may not be able to defer the expense. You may have to take what you can get quickly. It is those cases where having an emergency fund will really save your bacon. I cannot stress enough the importance of a well-funded emergency fund to deal with unexpected expenses if you want to remain debt free. That money is often the barrier between you and debt. Unexpected expenses are always annoying and something you wish you didn’t have to deal with, but they don’t have to be the catastrophic road to debt if you act carefully and wisely and keep your emergency fund full.