Recently after parking in the driveway, I was getting out of my car and walking into the house when a sound caught my attention. My car is a year 2000 model so it’s prone to making noises that you wouldn’t call typical, but this one stuck out. It didn’t take me long to recognize that butter-bubbling-in-the-skillet-before-frying-a-perfect-egg sound to be air escaping from somewhere. I walked a quick lap around and, sure enough, found that I’d picked up a large screw right in the middle of the tread on the rear driver’s side tire.
I jumped in the car right away because it was losing a lot of air, and soon I was going to have a flat tire on my hands. I drove straight to a tire store right up the road, walked in the lobby, and handed over the keys to let them patch me up. I’d taken my laptop bag with me so that I could work while I waited, and about thirty minutes later I walked out of that store with a freshly patched tire and was on about my day.
I want you to notice the absence of something in that scenario: STRESS.
Annoying vs. Crisis
Have you ever found yourself in a situation like this with something like a flat tire, a dead battery, or some other car repair that needed to be handled right away? Isn’t it so annoying? I had a plan for my day, and it didn’t include sitting in the lobby of a tire store doing work. We rely on our cars so heavily that when they are temporarily out of commission, it can feel like our entire world is off.
Then comes the stress-inducing question: How much is this going to cost?
For most Americans who have no emergency savings of any kind, a car repair isn’t just an annoyance to be dealt with. It’s a financial crisis. They will stand at the register of the mechanic’s shop with their bank account open on their phone trying to crunch numbers and do checking to savings transfer ballet to make it all work. Those big hunks of metal we drive around can cause some real mishap in our lives when they break.
But here’s the good news…CASH can repel most of your car stress.
Expect the Unexpected
In addition to saving $1,000 or 3-6 months’ expenses as an emergency fund depending on where you are with paying off debt, I use and recommend cash for everything possible. I also know something about cars: they break.
At some point, you will have a flat tire to deal with. I live in an area where a lot of new homes are being built. That means all it takes is a gust of wind to blow a box of finishing nails off a roof or a distracted worker losing track of some screws from his tool belt to fill the road with tire killers. I’ve had to patch a tire or buy a new one once a year for the last three years. Maybe your air conditioner will go out, or your ignition switch will need replacing, or your brakes will start sounding like a screeching pterodactyl and need to be changed out.
The bottom line is, we all know that cars will need repairs and maintenance. If we know that’s the case, then let’s take some steps to be ready for them so that we aren’t stressed when they happen.
Plan for Solutions Before the Problem Happens
Part of the cash that I set aside every time I get a paycheck goes into our “Car Repair” category. For us, we have a set of envelopes that hold our cash in various categories, so we actually have an envelope with “car repair” scribbled on the front, but you can use whatever method works for you. Every time I get paid, we put $25 or $50 into that envelope.
Over time, that amount builds up to a few hundred dollars. If it ever gets to $500, we stop feeding it until we have to use it for something. That day I discovered the flat tire, I simply grabbed a couple bills from the envelope, jumped in the car, and drove to the shop. I didn’t have to think about it. There was no stressed-out phone call to my wife asking if that money was needed elsewhere. No numbers had to be crunched to make sure we could afford to eat and pay rent if I used this money.
The cash was already set aside for this exact occasion, and I could immediately fix the problem and move on. Sure, it inconvenienced my day in that I had to work from a tire shop lobby on their less-than-stellar Wi-Fi for a few minutes, but no major hitch was thrown into my life.
Beyond the Flat Tire
I know what you’re probably thinking. A flat tire is not a big expense, so why should you care? And you’re right, it was only about $20 to get resolved, but don’t miss the forest for the trees here. There’s a principle I’m trying to communicate. Having margin in your finances reduces stress and improves your ability to make decisions. We had cash already set aside for car repairs, and that enabled me to not worry for a second what I was giving up in order to put that money toward fixing the flat tire.
It would’ve been no different had I had to drop $400-$500 on some other repair. We had money set aside in our car repair envelope, which in our minds means it’s already spent, so emotionally it was a non-issue.
In the above image, which was taken the morning of publishing this post, you can see the wear of my tires. If you don’t know this trick, you can use a penny to check how close you are to needing to replace your tires. When you hold a penny in your tread upside down, you should only be able to see part of Lincoln’s head. If his entire head is visible, it’s time for new tires.
Now, I’ve been keeping an eye on this for a while, therefore it isn’t a surprise or an emergency for me. In the next few weeks when I go to the shop, it will be the same story. I will take the cash we’ve been putting aside PLANNING for this situation, and I will hand over a few Benjamins in exchange for some shiny new tires.
Think about how good it would feel the next time your car breaks to be able to just fix it. No worry, no stress, just the inconvenience of the time lost. Wouldn’t that feel more peaceful than putting it on a credit card or having to play musical dollars with your checking and savings accounts? That security alone is enough to keep me using cash with the sort of sinking fund approach we use for car repairs.
How do you know when to use your emergency fund?
If you have your emergency fund in place, you budget every month, and part of that budget is going into a car repair cash category, this is a very easy question to answer.
When a car repair is needed, if the cost of it is less than what you have in your car repair category, you simply pay for it out of that cash stash. Regular oil changes, tire rotations, and repairs up to a couple hundred dollars typically fall into this category for us.
Now let’s say that you need something done that costs more than you have in your car repair envelope, but can be covered by that amount plus part of your budgeted savings for this month. All you have to do is combine the money you were going to save with your car repair money, and fix your car. No need to touch your emergency fund. You’ll just save less this month in order to meet your transportation need. This is called cash flowing the expense.
I consider a car repair worthy of dipping into the emergency fund only when the amount is greater than the sum of my car repair envelope and the amount of savings in my budget for the current month. Even when something this big happens, you still experience low stress because you’ve insured yourself for times like these. People are often so scared to use their emergency funds for actual emergencies, but that’s precisely why you have it to begin with. Having a stack of cash in any unexpected situation goes a long way to putting space between you and a bad day.
Have you had an experience where you avoided stress by having money readily available? Have you ever had to fix your car on short notice like this? I’d love to hear about it in the comments below.