Thursday, June 9, 2011

The A/C Always Breaks When it’s Hot Outside

I am in New Jersey right now and it is pretty warm, about 95 degrees today!AC And earlier this week in Nebraska it hit the triple digits for the first time of the summer season. So what happens when it gets hot? Of course, the air conditioner breaks!

It seems to be the natural order of things. When the weather changes and you start turning on appliances that you have not used for several months, they never work properly. The air conditioner has a hard time in the summer, the furnace has a hard time in the winter and the car has a hard time every time the seasons change!

If you have heard me speak in the past or read this blog for any amount of time; you know I am a huge fan of  having  an emergency fund. In fact, I am such a big fan that I think an emergency fund is the single most important thing you can do to improve your financial wellbeing. So when the appliance breaks down, some of you who have an emergency fund might initially reach to that account to cover the cost. But is it really an emergency? Well, I think that is a question worth considering!

Here’s the deal… I would argue that events which occur with some sort of frequency and certainty are not emergencies. Case in point: Christmas. Some people might like to argue that Christmas sneaks up on them every year and forces them to incur credit card debt. It happens every year people! You can plan for that, it’s not an emergency.

If there another thing I know for certain it is that cars simply exist to get us from point A to point B and break down all along the way - which in turn sucks money straight from our wallets.

There is a certain level of certainty that if you live in the Midwest you will have to make car repairs and eventually purchase a different vehicle.

So things that have frequency and certainty should be saved for in my humble opinion. However, you have to decide what qualifies as an emergency for your family. I would actually encourage you to literally make a list of the things that are emergencies to you. There is something psychological about physically writing things down. I think it forces you to actually commit to it – after all you wrote it down!

So what about the random home appliances, decks, siding, windows, etc.? I would suggest saving for those costs since we know they are going to happen! A few months ago I wrote about a little rule of thumb that I would like to bring back to the forefront of your memory. If you own a home you should consider saving 1.5% of the value of your home each year. Then simply earmark this account for up-keep expenses. As you might remember, I am a new homeowner and I’ll tell you that so far in the first 6 months I have had to call both a plumber and and an A/C repair man. That 1.5% savings account is coming in handy!

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