A Life Without Debt: Dealing With Unexpected Expenses

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 m

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9 Responses to A Life Without Debt: Dealing With Unexpected Expenses

  1. Horlic says:

    Great article. Just to pick your mind, how much should we allocate for unexpected expenses?

  2. Wow, amazingly thorough article detailing how one should handle an emergency.

    It’s very refreshing to see someone not get caught up in the credit card cycle by living debt free and planning out an emergency fund!

    Great work!

  3. Sadie says:

    @ Horlic: It depends on what you have in your life that’s likely to go wrong. For example, if you rent and your landlord takes care of things like leaky roofs, clogged pipes, and broken appliances, then you need a lot less than a homeowner who has to pay for all that. If you have one car, you need less than if you have three cars. And so on.

    What we do is this: I have a general idea of what things cost to repair/replace around here and I work off the worst case scenario. For example: I know that if the entire heat/ac system were to fail beyond repair, I’m looking at about $4,000 for replacement. I know that I’d be looking at around $3000 if every single appliance were to fail beyond repair at the same time. Cars would be about $2000 to have a new engine or transmission put in, but most repairs are less than that. And so on. I add it all up and try to keep that much in savings.

    Do I expect every single thing to break beyond repair at the same time? I really hope that never happens. Most of the time I can get by with a lot less money by repairing the item rather than replacing. But still, I like to have the worst case covered so I save toward that “doomsday.”

    I also keep extra in my savings in case of medical emergency, which is almost impossible to know what it would cost. I just try to keep enough to act as a hedge against MOST things that can go wrong.

    My advice would be to take inventory of what you have that’s likely to cause you an unexpected expense and get a general idea of what it would cost to replace or repair and then build toward that, plus extra for medical. You don’t have to have it all at once: anything you can save will act as a buffer when things go wrong. Just slowly and steadily build up until you think you could cover almost anything that might go wrong in your world.

  4. Monkey Mama says:

    Replacing a 13-year old appliance wouldn’t be an “emergency” in my eyes. I was actually surprised my your method.

    For us, we have a “mid-term savings” account that we contribute to monthly, for repairs around the house, replacing cars and appliances, etc., etc., etc. We contribute to this account monthly. As such we wouldn’t have to cut other areas to refund it. We always contribute to it.

    If we under-saved then we would resort to your method as a second line of defense (dip into the emergency fund). Though first we would lower our costs by buying used instead – before I’d dip into the emergency fund.

    I guess it leaves me curious why you wouldn’t always save for these kinds of things?

    Anyway, it amazes me how many people think because we “live on one income” that we would be screwed over if our washer broke.

    But yeah, it’s like, seriously? HAs no one heard of a savings account? Our washer did break when I was on maternity leave and we had no income. So we bought a new one with our mid-term savings. IT was 30-years-old – can’t say it was surprise.

    I did like the article!

  5. I would not call replacing an old washer an emergency. I would expect appliance repair/replacement to be in the house budget.

    (I would consider an emergency to be a sudden medical issue above normal illnesses, auto accident, fire…Things that you can’t expect to happen.)

    I see free working washers and dryers all the time on craigslist and free cycle. If one didn’t have the savings or means to get a new one, they could always go that route.

    The last time I went to a laundermat it was $2 per wash and $2 per dry PER LOAD. For a large family, who does 5 or more loads a week, your monthly laundermat bill would exceed a credit card monthly payment.

    While I believe one should avoid credit card debt, there are some times when it may be the least expensive way to go, esp if they also offer a bonus for signing up for a card (such as Sears).

  6. Diane says:

    I don’t consider replacing a washer to be an emergency either.

    When our washer died last spring, I was just about to replace the dryer because it was requiring multiple cycles to dry a load of clothes.

    The washer was actually older than the dryer, the dryer had been repaired the previous year & both were past repair.

    We bought both a washer & a dryer at Home Depot, using an offer of 0% interest for 12 months on my Home Depot account.

    I could have purchased both the washer & dryer using savings, but why give up the interest on savings when I could use their money for FREE!I knew if I needed to pay off the washer & dryer I could take the money from savings anytime to do so.

    I paid off the washer & dryer in 9 months with no interest & collected interest on my savings.

    When my son’s computer died, I did the same thing to purchase a laptop at Best Buy with 0% interest.

    I know many people don’t approve of using credit cards in this situation, but to me I’m actually saving money, as long as I’m not charging more than I could pay for.

    Using these free offers is the ONLY way I make a purchase on a credit card without paying it off when the bill arrives. It works fine for me.

  7. Stacy Adcock says:

    I consider any replacement/medical problem/job loss an emergency because the thought of going thru life having to plan to the max for those things seems exhausting! With that said, I do save for “emergencies” and all that savings goes into one account. It’s just easier to manage. I think the article make sense and I’ve wondered when the savings account is full enough. I still don’t know the answer to that when I consider adding all of my possible emergencies together. I think I’ll just keep adding to the savings (money market) account as best I can. I don’t know if I’ll ever know how much is enough.

  8. RAJEEV TIPS says:

    Very well articulated article.. thanks. I also feel that the most important thing here is to follow the thumb rule of spending less than one earns at all times without exception. Also one MUST have an emergency fund enough to see them through for 6 months as least.

  9. Meaghan says:

    Excellent advice! My family knows what it is like to have those unexpected expenses pop up…and they usually come in groups! Thanks for the post!

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