Thursday, December 20, 2007

The joys of unexpected expenses

Hubby lifted his left foot as he stood beside the snow-covered car, bracing his calf on his opposite knee. He peered down at his sole. “Huh,” he said. “I think I need a new pair of boots.”

Fecundity followed his gaze and snorted aloud. “I’d say you’re right.” She poked at the crack clearly visible across the ball of his foot, easily touching sock with the end of her finger. “Why didn’t you say something earlier?”

“I hadn’t noticed.”

As tempting as it is for me to get into a diatribe on how it shouldn’t be possible to miss a three inch hole in your shoe when there’s literally four feet of snow on the ground, I’ll skip it and instead talk about unexpected expenses in general.

Sometimes, as in this case, we should have seen it coming. Sometimes bad luck just falls on you from the sky, or, more likely, rear-ends you on the way to work.

The boot incident isn’t bad luck. Hubby bought cheap boots last winter. They wore out earlier than expected, but still should have been foreseen. I figure if I drag him into a decent shoe store this time, it’ll set us back $150-$200 and he’ll have boots which should last at least two full seasons, preferably five.

Our last round of actual bad luck (or, rather, bad luck leading to an emotional response which lead to stupidity) happened about two years ago. We were still living in an apartment, and we didn’t own a car. We were borrowing my parents second vehicle (which they’ve since sold to us, as they no longer need two after retirement). We came down to the parking lot and discovered that some of the delightful kids of the neighbourhood (did I mention the cheap rent?) had egged the car overnight for something to do. Cheaper and healthier than doing drugs, I suppose.

After much scraping (and swearing) to make it possible to drive said car, we were late, and Hubby was Angry with a capital A. We made a quick stop at a local deli to get some bagels I needed to bring to work, which made us even later. Hubby fumed a bit more, put the car into reverse, and promptly backed into another vehicle. Crunch.

Not wanting to up my parents’ insurance premiums, we didn’t claim the expense of having the victim’s vehicle’s bumper replaced, we paid for it ourselves, to the tune of $797.43 (the faxed receipt is still on my hard drive). Delightful.

How did we pay for it? Back then, we weren’t doing so well financially. I was making significantly less, and Hubby was still in school. We didn’t have an savings to speak of. We put it on the MasterCard, then paid the MasterCard (18%) off with our line of credit (7%). It probably took us three months to get rid of it entirely.

How would we deal with it now? Well, the boots are a relatively minor expense and shouldn’t cause more than a ripple in the chequing account. Another bumper cruncher would set us back a bit, but no use of the line of credit would be necessary, as I could suck any needed amount out of our emergency fund. Since our standard of living has increased significantly in the past two years, we’d have some room to save a bit of money by dropping back down a glutton level for a couple of weeks, which would allow us to build the fund back up quickly.

It’s my plan to build our emergency fund up further in the future. Right now we’re concentrating on getting it to $5000. I hope to have that done by the time I go on mat leave. Once Hubby’s student loan is gone and I’ve returned to work (the latter will almost certainly happen before the former), we’ll start slowly building the fund up to three month’s net income, which right now would be about $17,000. That’ll prepare us for bigger emergencies than a bruised bumper or a dead pair of boots.


RacerX said...

I really applaud getting the Emergency Fund together it is a lifesaver against what we call Ninja Bills! These are the bills that pop up when you least need them to and steal your money!

For us, we looked at our worst surprise bills over the last 3 years to set our comfort level, or $2000.

Then we are following the Ramsey guide and paying off all ofur consumer debt, then we wil go back to the 3-6 month emergency fund.

Really depends on where you are in your life cycle and what feel right to you as you need to live it!

FourPillars said...

I have to say that I wouldn't categorize worn out boots as bad luck - we need to accept that those costs happen (like car repairs).

The car accident is definitely bad luck.

Fecundity said...

@racerx - Good for you. Best of luck sticking to your plan.

@fourpillars - I couldn't agree more. I'm just hoping for some advance warning next time.