The Broken Down Car and the Emergency Fund

A couple weeks ago my wife called me on a late Friday afternoon to tell me the warning lights on the car dashboard were red. I don’t know much about cars, but I know that’s not good. Unfortunately, she wasn’t just down the street or a few minutes away where she could quickly drive to a local mechanic and meet me there. She was about two and a half hours away in a town called Valencia.

It’s the same area where Six Flags Magic Mountain is located. If you’re driving on Interstate 5, or “The 5” as Southern Californians call it, you’ll see Magic Mountain a little off the freeway. Nice place, but pretty far from our home in San Diego. Also far from Fresno where she was headed. Almost directly in the middle.

Normally my wife and I travel together with the kids but this weekend was a bit of an anomaly. She decided a couple weeks ago to head up to Fresno with our girls to see her dad play a gig at a local restaurant and visit her grandma. I already had some work scheduled on Saturday and Sunday so I wouldn’t be able to go. Of course this was the one time our previously very reliable car decided to light up the dashboard with red warning lights.

Red Lights on the Dashboard

Anyways, when she saw the red lights on the dashboard, she called me. With me knowing almost nothing about cars other than red warning lights all over the dashboard are bad, we decided it would be best to take the next exit and at least get off the freeway. “Turn off the car, then turn it back on” I suggested. I’ve successfully done this with computers and other electronics, so I figured that might work.

“Wait!” I quickly called back! “Maybe you shouldn’t turn the car off because it may not come back on.”

She had already turned the car off by then—luckily it did come back on. Still red lights though. Darn, that didn’t work. Next step was to figure out what to do.

We both agreed she needed to find a mechanic in the area. The Grapevine (a mountain pass between Los Angeles and the Central Valley) was coming up and there aren’t a lot of towns to stop in the area. This was the best spot to find a mechanic.

Fortunately, there was a mechanic pretty close by with good reviews. She took the car to the mechanic who ran a diagnostic. The mechanic was nice enough to talk to her, and then me on the phone. He thought there was an internal leak somewhere, but would have to open up the car to get a more accurate idea. It was already late afternoon by this point and there really wasn’t anything more he could do before the shop closed for the weekend.

Nor Worth the Risk

Even if he knew exactly what the problem was, he’d still have to order parts which wouldn’t be available until Monday or Tuesday anyway. I asked him if he thought the car was safe to drive. He said maybe if it was just him. But with two little kids in the car, he sounded hesitant. My wife and I had the exact same hesitation so we decided we weren’t going to risk it.

Having solved one problem, now we had another. How she was going to get Fresno was the next challenge. Or I could always drive up and bring them back home. We went through a few different scenarios, and ultimately decided to get a rental car. She’d drive the rental car to Fresno, take it back on Sunday, her dad would follow (he was heading back as well), and then give them all a ride back to San Diego.

We’d leave the car in the shop, then drive up sometime next week to pick it up. Since it looks like there is going to be engine work involved, my guess is this is going to be in the thousands, not hundreds. The mechanic said he’s not sure, but it’ll probably be around $2,000. If it’s too high, I’ll call other mechanics in the area and get a few estimates. We can always have the car towed from one auto shop to another if needed.

Back to the story. The rental car place was nice enough to deliver the car to my wife at the mechanic. Once she got the car seats in, she’d be ready to go. She ended up making good time and my oldest daughter was actually excited because she got to ride in a new car. It’s good to be a kid, huh?

So what’s this story got to do with personal finance? Everything I think.

A Different Story

A little over ten years ago I had an issue with my car that ended up being close to $1,500 to fix. To call it financially devastating would be a little dramatic, but it’s fair to say it had a very negative impact on my finances for several months.

Years back I was living paycheck to paycheck at the time and of course didn’t have an appropriate emergency fund. I think I had close to a thousand dollars, but I don’t remember the exact amount. I know for a fact I didn’t have $1,500 though. My emergency fund was significantly lacking and wouldn’t cover things like a broken down car far away from home.

Since I needed a car, I put the repair on my credit card. I paid several hundred of it off when the statement came due, but ended up carrying a balance. Which meant I was paying interest to the credit card company. I continued to pay interest to the credit card company for several months until I had it all paid off.

Me not having an appropriate emergency fund not only cost me money in the interest I had to pay on the credit card, but it was also stressful. Even though I wasn’t good with my personal finances at the time, I didn’t like being in credit card debt. It was something I thought about often, and I knew deep down this happened because I was being irresponsible with my money. I didn’t know how irresponsible at the time, but I knew it was an issue.

If I had an emergency fund at the time, I could have easily paid for the car repair and been on my way. Of course it will always hurt to pay a $1,500 bill, but there would have been no credit card debt, stress, or playing catch up just to get back to zero.

Value Based Spending and Peace of Mind

In my book, I wrote a lot about value-based spending. Something I value is having financial peace of mind. And one of the ways I have financial peace of mind is through an appropriately funded emergency fund. As a result, I’ve worked hard to establish an emergency fund just for things like a broken down car.

Even though this emergency fund isn’t earning me a high rate of return like an investment would, it does buy me peace of mind. Hard to put a dollar value on that, but personal finance isn’t always about dollars and optimization. Sometimes it’s just about finding ways to sleep better at night.

Looking back at these two experiences, there’s a stark difference. When my car broke down over 10 years ago, it was a major financial blow. It put me into debt, created unnecessary worry, and prompted me to cut some things out in the coming months to pay off the debt.

When my wife’s car broke down over the weekend, it was an inconvenience. Once she safely got the car off the freeway and to the mechanic, the primary focus was to get her a rental car so she wouldn’t have to wait around too long. Having an emergency fund gave us the luxury of options, and the peace of mind knowing we already have the money to pay for the rental and whatever repairs our car ends up needing.

Safety and Convenience

We were able to make a decision based primarily on safety and convenience, rather than just money. Of course money was part of the equation, but not the primary one. Having an emergency fund meant the broken down car didn’t have to become a financial crisis.

Things like cars breaking come up in life. It’s really a matter of when, not if. We can do things to reduce risk like getting the car regularly serviced, but it’s impossible to eliminate all problems. Knowing that problems will occur now and then, we might as well have the money available so it doesn’t turn into a crisis. Which is exactly why I like having an emergency fund, and why we have one.

Do you have an emergency fund for things like a broken down car? Why or why not?