balance emergency fund big ticket items.
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| Mon, 04-03-2006 - 3:57pm |
How do you balance these things?
We have no emergency fund, so we end up charging things.
We have big ticket items several times each year.
Property taxes, May and November
Car registration, June
Home owners insurance, March, June, September, December
my moms insurance and things like that.
Doctors bills, various, but my son just had to have xrays, so we now owe at least $600..
We put $50 each week into an ING account with the idea that it will pay these large items as they come due. But in reality there is never enough in there. As you can see several of the items are due all at once.
SO how do you handle this? Should we skimp on all of our cc payments in order to build a fund for this stuff.
What about an emergency fund, how much do you have and do you skimp in other places in order to build it?
Our budget is fairly tight already. Ever since I lost my part time job. But I am looking for another one.
Thanks
stacy

Hi Stacy,
I understand some of those big ticket items do take some planning. The first thing I would encourage you to consider is changing the way you think about emergency fund. At least to my way of thinking, none of those things are an emergency. They are expected expenses and they need to be saved for over the year. I would not pay less than your minimum credit card bills to start saving this money each payday but it would come before snowballing for me because snowballing in one month and turning around to charge one of these expenses a month or 2 later defeats the whole purpose in my mind. You also may need to 'snowball' this savings account for a while to get enough in there to be ready for your next expected event since you won't have a full year to save for some of them but by this time next year, you should be set.
Here's what you might want to try:
1. Take the actual amounts for all of these bills from 2005 and add them up. Divide by the number of paychecks in a year. That is the amount that needs to be set aside into another account (I've heard it called a freedom account).
2. Can you see if your insurance company can bill you monthly for your homeowner's insurance? Some companies charge hefty fees to do that so watch out for that but mine only charges $1/mo to bill me for auto and homeowners so it is worth it to me to spread it out a bit. It's like 1% of my bill so I don't think it is too big a deal. Also, you might want to check all of your insurance costs and see if you can do better (most companies offer a discount if you have both home and auto with them)
3. See if you can utilize your husband's company FSA program to get your medical expenses taken out of pretax dollars. You'll still wind up paying it but you will pay less in taxes AND they will pay for expenses under what you are scheduled to save that year even if you haven't saved the whole amount. For example, if you sign up to save $1k a year in your FSA and then your son has an ED visit w/a $300 copay the first month. They will pay all $300 because you've committed to saving it. The other 'perk' is if you leave for some reason before you've paid it all, they can't come after you to pay them back.
4. If you got a big tax refund this year, you might want to adjust your husband's W4 to get more take home pay throughout the year.
HTH!
Peg
I will be thrilled the day I have done a good job of saving the money to pay for all our yearly expenses and can just calmly take the money out of savings. Right now, my part-time job covers them but since I'm hired by the semester that's a bit nerve-wracking. I know Mary Hunt suggests a freedom account where you put money for these expenses. You figure out how much to put in by taking the bill and dividing by 12. Sometimes that can make you really rethink things-for example-my DH has membership to an organization each year for 250.00. That's 20.83 I need to put aside each month WOW! Eventually I will do this will all the yearly bills but for now I scramble.
We just put 1,000 of our tax refund for an emergency account. I did an ING account so it will be harder to touch.
I would suggest skimping on the CC payments to have the money for them. If I'm not hired for the fall (I usually find out in July or August) then I'll back off my snowflaking and put that money away for those expenses.
Taleyna
Peg,
Thanks for the suggestions. Sorry I wasn't clear. I meant to talk about having 2 seperate accounts. One for the expected expenses and the other for suprise stuff.
The expeceted stuff is the property taxes and insurance-this is what I use ING for.
The suprise stuff is medical bills.
We do not have any insurance, haven't for 10 years, so we must pay cash for medical stuff. My sons most recent injury, currently the bills total $550, we are waiting for one last bill.
We do not have any types of plans available through our works.
I have changed our car insurance to monthly. I just changed our homeowners to quarterly. This helps break it up alot.
We get minimal tax returns, so I cannot adjust anything there.
How much would you suggest for our actual emergency fund?
Stacy
Hi Taleyna! I recognize you from another board.
This is what I must make myself do. Pay only minimums for a while and then build a fund. I am just not sure how much to build it to.
Currently the way I have my ING account set up, it will cover the property taxes and homeowners insurance.
But I need another fund. For home repairs and also, doctor bills.
Thanks
Stacy
Hello Stacey,
I agree with everyone that it's a great idea to have the "emergency" fund and the "freedom" fund.
In terms of medical insurance, have you looked at Blue Cross and Blue Shield's websites? They have a bunch of different family plans now that are designed to be less expensive. Kaiser Permanente is even better, but I know they are only in a few states. My sister just bought a plan from Blue Cross that covers people without insurance in their twenties, for $75 a month and she's really happy with it.
These less expensive plans aren't always comprehensive, but they will cover you if there are real medical emergencies (ie. a broken arm). I recently broke my arm really severely after 31 years of never getting sick, hurt, or going to the hospital. Without surgery (which they recommended) or physical therepy, just the xrays and doctors cost over $15,000. Luckily we have insurance, but it really drove home the point that some sort of plan for catastrophes might be a good goal.
yes, I thought I recognized your name as well-mmmm, for medical I would probably calculate 2 doctor visits per person per year, 2 dental visits per person per year and a couple of prescriptions and then divide that up to know how much you should put aside. I think the unexpected expenses will still happen with that and that's when you wind up talking to the hospital/doctor about paying on a payment plan and cutting back to the minimums for a couple of months. Believe me, I know that can be discouraging-DD had an MRI last year that really threw us for a loop-we hadn't calculated enough for our flexible spending account.
Taleyna