Preparing Financially for Emergency Repairs
With a new year come new opportunities to get on the right financial track. Unfortunately, the new year also comes with a new list of challenges. In this case, the best offense is good defense — and what better defense can you establish than creating an emergency fund to help prepare you financially for all of life’s little surprises, including those surprises that could affect your car and its performance.
Setting up an emergency repair fund can help buffer the financial strain that unexpected accidents can put on your bank accounts. It can also seem like an intimidating task. As Markus L. Horner told us, though, the benefits far outweigh the inconveniences. “I’m not quite sure why it works, but it does. It has reduced our daily stress level knowing that regardless of what happens, we will be able to handle it without going deep into debt.”
We spoke with some financially savvy folks to see and learn how they did it and made it work for their families.
Make it automatic
“We set up a savings account with our bank about five years ago,” Markus L. Horner told us. “I then set up an automatic withdrawal of $100 every Friday from the checking account — this money is then placed in the savings account. This happens every Friday without needing to take any action.”
If you can’t make it automatic, make it second nature.
“My wife and I have a savings account set up specifically for car repairs,” Matt Becker told us. “We put a set amount into that account every month so the money is always there when we need it.”
Determine your car repairs account goal.
Elle Kaplan of Lexion Capital Management LLC recommends having a general emergency fund with six months of living expenses reserved. Although this is a good general rule of thumb to deal with a wide range of emergencies, you may need to adjust it according to your needs. Make sure that it covers fuel expenses, car rental expenses and any other bills that could crop up as a result of car problems.
Consider expanding those reserves beyond car repair.
Becker and his family use the same principal to save and set aside money for other needs. “We do the same thing for things like travel, medical bills and other big irregular expenses that don’t fit neatly into a monthly budget.” Once you’ve gotten into the habit, apply these same practices to create other savings funds.