Emergency Fund vs Credit Card

Jumping off of buildings or throwing yourself out of a plane or diving off a 400 foot bridge is a crazy adrenalin rush that’s addicting. But without a safety net or parachute or harness… you can only do it once. My emergency fund is the safety net that allows me to jump off of life’s buildings — to take Life-Changing risks —  as often as I want.

So with a fully loaded emergency fund (3-6 months of my living expenses, sheltered quietly from my sticky, greedy, materialistic hands in a tidy money market account), I can take risks. I can “step out in faith” ALL THE TIME as churchy people love to say. For example, if we decide at age 35 that my husband wants to quit his job and become a full time freelance basket weaver in Uganda, or a full time missionary in Sri Lanka, or if we want to quit working and volunteer full time at a non-profit, or if I want to start a nonprofit and not get paid ever — or whatever the crazy dream might be — we can actually do those things.

We don’t want to.

Yet.

But we could if we wanted to.

Because we have money to tide us over while we figure out our next steps, we don’t have to claw our way through every pay period, just waiting for the next one. That’s not really why we have an emergency fund. But it’s true. If we dream of doing something crazy, we can. This veers away from Dave Ramsey a bit. For him, ER funds are for well… Emergencies. And I 100% agree with him. Only Emergencies should be paid for with the Emergency Money. And that’s like real emergencies. Like my house burns down and I need a hotel. Or my car explodes. Or something.

But there’s a “secret levels” situation when it comes to finances. (Yes, that’s a Mario reference). And that is, when you’re walking with Jesus and you’ve “won with money” and you’re living at peace with your finances and He starts telling you to do some pretty cool stuff, sometimes that stuff blows protocol out of the water. Sometimes — rarely but occasionally — that crazy stuff just doesn’t fit on a spreadsheet. So we use our Emergency Fund, theoretically, on a “secret level” playing field. We use it only 100% for emergencies. And we also, in our minds, keep it open as Seed Money for Crazy Stuff that Will Bless Other People. We’ve never given away our entire ER fund. But it’s not beyond us. But we DO let it cover emergencies that aren’t really emergencies, like buying groceries for ourselves because we gave our whole paycheck away. (This is rare. But it just depends on what the Holy Spirit tells us to do.). It’s not really an emergency because I could have just not given the paycheck away. But it’s kind of an emergency because Jesus told me to…. and…

Jesus supersedes our spreadsheet.

Also, as a rule, first and foremost we make sure our family is taken care of. We make sure we typically are paying into our retirement funds and hacking away at Mort. And we are saving for emergencies. But sometimes, we go off course. We have to keep it exciting.

When we feel like giving over our ENTIRE PAYCHECK to a cause we are passionate about, we can. And we rarely just write a check to some non profit. Usually we buy groceries or pinatas or bicycles or college tuition or Nikes for some kid… Because we have money in the bank to live on.

Or last summer, we woke up one morning in August and decided to go to Disneyland. So the next day when his paycheck came, we just bought our Disney trip. With cash. Because we felt like it. That money was ALL OURS. It didn’t have to go out the door to creditors to pay for some emergency that had happened long ago. Because the emergencies that had happened long ago, had been paid for long ago. They didn’t haunt my mail box every month with bills and memories of the horror we experienced in our emergencies.

Now an emergency fund itself is not for buying Disney vacations. But it enables me to use my paycheck for anything I want. Because it is a safety net for my life. Knowing I have money to cover my risks makes me able to do crazy things. I can use my paycheck to go to Disneyland because I don’t have to always be thinking “well what if my car breaks down… what if this, what if that.”

When our gold colored 2006 minivan gives up the ghost, we can either (a) pay to have it fixed right that minute, and if we’re on the side of the road somewhere far from home, we can pay for hotels and airfare and rental cars until we are home safe.  (A friend just bought a minivan on credit and was SO PROUD of the warranty she got with it “for free”, which paid for all of the above. And the cost of that “Free” warranty was really just rolled into the price of the car, so she will be paying for that warranty monthly for the next five years with interest, and she might not ever use the warranty. We, on the other hand, just pay for stuff when it comes up, interest free. Simple.)

Or we can (b) buy a different car with cash that day. If we wanted. And when that happens, we will look at each other and say “what do you know? The car is broken….do you want to grab a couple lattes? Play a game of tennis? Spend the night in a swanky hotel? Go car shopping leisurely? Or otherwise chill out while we handle this minor situation with grace and dignity?” Instead of “OH MY GOODNESS! Let’s run around like crazy people screaming into the universe about how only horrible things ever happen to us and this house of cards we’ve built is crumbling right before our eyes and all my hopes and dreams are crushed!!”

Because this risk is covered, I don’t have to hastily sell my crappy car and corner myself into a bad loan. And here’s a bonus weird thing… because we know we have enough money to actually buy a nice car with cash…. we don’t feel the need to. I am perfectly content — thrilled, actually — to drive our Gold Dream because I know I don’t have to. It’s not like when I was a poor white kid and I had to wear Goodwill jeans and so I spent every second of every day praying nobody would realize they were secondhand and I just couldn’t wait to one day have enough money to buy nice jeans. Nope! Instead I feel like.. HECK YEAH this is my car! And we can retire in five seconds. Wahhoo!!!! And I love my thrift store clothes!

When half of husband’s department got a pink slip and all the families we knew from work were FREAKING OUT and taking second jobs and moving back to their home states and downsizing etc… we took a vacation. We sipped French press coffee on our backporch and listened to Train Radio on Pandora. We were, in essence, unfazed. Because with an emergency fund, you can weather the storms of life. We did shop for houses in other states. But it was FUN and empowering! We were dreaming together instead of having a nightmare together.

A fully funded emergency fund is like having a fully stocked underground concrete shelter, or whatever those people have on Discovery Channel. It means no matter what happens, you’re going to mostly be okay. Your life might change, but it’s not going to end. You might be annoyed, but you won’t be totally crushed. Struck down, but not destroyed.

Conversely, using credit cards to cover emergencies can result in an number of situations. Lots of my friends very proudly use credit cards to pay for emergencies and they swear it works for them. But we have noticed in those emergency times, those friends are still pressured. Still stressed. Still worried when the card is maxed out with a huge emergency and they have to use a different card. Still recuperating for months after an emergency. Still strapped with car payments when their car breaks down beyond repair and they’re “forced” to buy a new one on credit.

Those payments, at the end of the day, are money that they don’t have in hand and they are essentially strapped to for the rest of the payment cycle. These are the people who don’t understand how we can just pay cash for a trip to Disneyland. (But you’ll miss out on airline miles that you’ll never use! #worthit #smallpricetopayforfreedom) Sending 20 bucks or 500 bucks out the door every month to pay for “emergencies” on a credit card is that much more money that’s not being invested. That’s money that’s not even allowed to be given away.

It’s out of play.

(In fact, if I save what my friends pay in monthly credit cardpayments, I will have enough money to buy my own seat on any airline, at any time I want, to anywhere I want. Almost like…. airline miles with no strings attached.) Using credit takes money out of your control. Using credit bandages emergencies, it stops the bleeding for a time but it follows you around for months or years. Ugh that’s not freeing!!

Being free looks like DOING WHATEVER I WANT with my money every day. That’s worth the really really hard work it takes to build an emergency fund. An Emergency fund means I get to do whatever God calls me to do at any minute of my life. Or anything I personally want to do at any moment of my life.

I get to take all the risks I want. Wahoo! That’s freedom.

 

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