Just Because The Budget Board Will Understand - VENT ahead

[indimom]

She did set aside money for home and car repairs, but more of them happened this year than expected.

I do risk analysis for a living - well, its part of my job. The way you do this "officially" is you say....

There is a 20% my car will need a major repair this year and cost $3k, reserve $600.

There is a 40% chance my roof will need to be replaced. We are on year 11 of ten year shingles - I might get another year or two out of it - thats $20k = reserve $8k.

There is a 10% chance I'll have unexpected medical expenses, my deductible is $6k = reserve $600.

You set aside $9,000.

Then you set aside some more "stuff blew up that wasn't expected money."

And you are screwed if the roof needs to be replaced and the car has major repairs.

We like to believe that if we save enough we will be safe. But you know what, it isn't true, unless you are Bill Gates, chances are pretty good you can't save "enough" for every possible emergency. And eventually you need to balance savings with living. The OP did everything right - she had her rainy day fund. She paid for vacation in cash - she just had a "bad year" and now her rainy day fund is exhausted. But the thing with risk analysis is its a probability game - chances are pretty good that having all this bad stuff happen this year, next year there will be a lot less of it, and she'll be able to rebuild the fund. When everything goes wrong, the next year the roof doesn't need to be replaced - its under warranty. And the cars transmission is good for another 30k miles. There may be new risks, and you are constantly reviewing and reserving for them. But you do crawl yourself out of the hole - a lot more successfully than if you had to put the new roof on the Visa card.

Good Explanation. I was struggling with how to explain our savings "logic" and how we went from sitting pretty in June, 2010, to playing catch-up in 2011.

Since we're on the subject, how do people "plan" for their medical emergencies?? Do you allow more and more to build in that fund year to year, or just hold onto a certain amount?

I'll honestly admit, we had NO medical savings whatsoever - which was the biggest part of our problem. We could have handled the other issues, but topped with the medical it got difficult.

In the ten years prior, we had nothing more than occasional antibiotics, one run for stitches, and one broken nose between the four of us. We basically assumed we were "healthy" and didn't anticipate anything worse than a broken bone from sports or maybe an illness like gall stones or kidney stones for the adults. In reality, statistically, maybe we were overdue for something and should have been steadily building a medical account all those years??

How do you know how much is enough when it comes to medical emergencies?? How much (beyond your deductible) do you save??

 

[crisi]

Since we're on the subject, how do people "plan" for their medical emergencies?? Do you allow more and more to build in that fund year to year, or just hold onto a certain amount?
.....

How do you know how much is enough when it comes to medical emergencies?? How much (beyond your deductible) do you save??

Well, that is a zillion dollar question. We have enough money to cover our out of pocket maximum each year, and carry disability insurance - but if we had several years worth of cancer treatments - we wouldn't have enough. I don't think you can ever have enough for a truly catastrophic event - though making sure you have good insurance helps.

My brother in law has terminal cancer, no disability insurance, lousy regular insurance and can't work. We are helping support him. And then we will bury him. And you can't save for that. I just ended up working for at least five more years when I'd intended to tie off the kids college funds and retire early.

 

[indimom]

Well, that is a zillion dollar question. We have enough money to cover our out of pocket maximum each year, and carry disability insurance - but if we had several years worth of cancer treatments - we wouldn't have enough. I don't think you can ever have enough for a truly catastrophic event - though making sure you have good insurance helps.

My brother in law has terminal cancer, no disability insurance, lousy regular insurance and can't work. We are helping support him. And then we will bury him. And you can't save for that. I just ended up working for at least five more years when I'd intended to tie off the kids college funds and retire early.

So sorry for everything your family is going through. That's heartbreaking. A friend of mine recently lost her brother from cancer, and his wife is facing a tough road. They had four children and while he managed to work some right up to the end, they have huge medical bills and insurance denied some of the final claims as unnecessary. They are fighting it, but who knows?? It's really sad and scary stuff.

I've been trying to get a grip on the medical thing for the last several months. We're blessed that our insurance did decide to pay for the treatments, which are considered experimental and off-label. But, if they hadn't we would have needed to find anywhere from $500-$3,000 every six weeks for treatments.
I never really considered a time when our insurance would deny coverage and we would need that kind of money on a regular basis. Our medical issues have always been pretty typical and easily "fixed." It's been a real eye opener.

 

[crisi]

So sorry for everything your family is going through. That's heartbreaking.

Thanks - it hasn't been easy. But you do what you can do.

 

[bedogged]

I have had 4 major completely unexpected expenses that came out of left field this year. I had a nice, fat savings account before all of this and now I am just in the rebuilding zone.

Well, today, DH informed me that there is no way we can put it off - we need a new roof this spring. He caulked and spot patched the roof (he learned how to roof from a master roofer friend several years ago. If he's ever out of work, he has a second profession, I guess.) but says it will probably last about 9 months before it MUST be replaced.
Thanks for letting me vent and rant! Nobody else understands why I am so upset!

Won't your homeowner's insurance help you? Here in Colorado hail damage is very common. In 30 years we have had our roof replaced twice paid for by insurance. I'm certainly not an expert, but it might be worth having your insurance company out to take a look?

 

[JaymeC]

That said, car repairs, home repairs, and medical bills are not unexpected. All of those are to be expected at some time. So, why is a vacation fund being funded before car repair or home repair funds are?


Like I said, I'm not there yet, but I'm working on it and can't see how stuff like car repairs or home repairs can be unexpected.

This is just to address these two topics... in our household, our vacation fund will be funded at the same rate it has been despite numerous knocks this year because it's been an extremely abnormal year for us... therefore, both dh and I are comfortable re-funding our emergency fund and our vacation fund at the same time.

I will say this though, our car save up fund (to pay cash for whatever our next new car will be) is not the same as our emergency fund. Planned household repairs are not the same as our emergency fund. Our emergency fund is for those Uhoh moments that yes, everyone has. To give you an example of what our emergency fund has covered this year, there has been the emergency assistance of my family (to keep a house over their heads) of 2k, a stolen air conditioner (yes, literally stolen from our yard) cost of 3k, a completely out of left field medical expense of 2.5k, and the one thing that is totally my fault and I didn't catch which is the paperwork wasn't filed properly for dh's tuition, costing us an additional 2k. Totally my bad on the last one, but that expense is unexpected because his tuition was already accounted for.

I'm not the OP, but I guess I thought that needed an explanation from more than one source. Though I can't find a job in accounting because of the recession, my degree is in it and I promise our finances are planned down to the penny, but even the best laid plans sometimes get a monkey wrench or two. On the bright side, our prior savings for our emergency fund in all those years when we didn't have lots of serious emergencies is what allowed us to escape from the current ones with just a lot of annoyance at the cost, instead of going into debt to pay for them.

 

[Sagginit]

She did set aside money for home and car repairs, but more of them happened this year than expected.

I do risk analysis for a living - well, its part of my job. The way you do this "officially" is you say....

There is a 20% my car will need a major repair this year and cost $3k, reserve $600.

There is a 40% chance my roof will need to be replaced. We are on year 11 of ten year shingles - I might get another year or two out of it - thats $20k = reserve $8k.

There is a 10% chance I'll have unexpected medical expenses, my deductible is $6k = reserve $600.

You set aside $9,000.

Then you set aside some more "stuff blew up that wasn't expected money."

And you are screwed if the roof needs to be replaced and the car has major repairs.

We like to believe that if we save enough we will be safe. But you know what, it isn't true, unless you are Bill Gates, chances are pretty good you can't save "enough" for every possible emergency. And eventually you need to balance savings with living. The OP did everything right - she had her rainy day fund. She paid for vacation in cash - she just had a "bad year" and now her rainy day fund is exhausted. But the thing with risk analysis is its a probability game - chances are pretty good that having all this bad stuff happen this year, next year there will be a lot less of it, and she'll be able to rebuild the fund. When everything goes wrong, the next year the roof doesn't need to be replaced - its under warranty. And the cars transmission is good for another 30k miles. There may be new risks, and you are constantly reviewing and reserving for them. But you do crawl yourself out of the hole - a lot more successfully than if you had to put the new roof on the Visa card.

well said, i know plenty of people who did everything right, and just had a bad year.

OP i am having one of those years myself. a little over a year ago i was given the chance to move to my company's main office and get a good promotion. i went for it and had to re-locate, at my own cost. since then it has been a roller coaster. just when i thought i had some extra money my roommate went crazy and kicked me out. boom, had to come up with a deposit, money for movers, moving supplies, and buy more apt crap since the new roommate came with NOTHING except a chair and a loveseat. add in a few friends weddings, showers, and bachelorette party and i almost keeled over when i added it all up. i should be feeling the same way, thankful i had money saved and got my bonus. but i had really wanted to save more $ than i did.