As I’ve mentioned several times, my husband and I built up a sizable emergency fund before he went on disability. While on disability, we’ve been down some from our usual income, so we’re not increasing the emergency fund, but we have been continuing our tax set asides. When this plumbing emergency developed, we had the cash, but also had to readjust our spending plans for three sofas and sliding doors.
Why We Want to Readjust the Budget
Although we could buy the sofas and sliding doors right now, we also need to replenish the emergency fund with the $5500 we just spent on plumbing. When it was just $1775, we weren’t concerned, but we were concerned when it ballooned to $5500.
Other Priorities This Year
We have several major priorities this year, two of which are now in flux.
- Replace the French doors with sliding doors. We want to do this in 2010 because there’s a 30% tax credit for energy-efficient windows. That would be a significant savings.
- Buy me a new car. One car I’m considering also has a tax credit, although others I’m considering do not. I don’t expect the tax credit to be used up this year, but I don’t want to miss out on it by waiting too long. The other reason I need a new car is simply because mine is almost 14 years old and has over 130,000 miles on it. It’s starting to show its age.
- Buy furniture. One room of our house is empty and another room has furniture that is too large for the room. We’d started to buy, but we’re not done yet.
- Increase retirement withholding. We really need to get on this.
- Build our emergency fund. We need to get up to six months expenses, but we have to balance that with other priorities.
How to Adjust the Budget
In order to adjust the budget, we did a few things.
First, we looked at our planned spending for the next few months. We worked out that we’ll need to transfer money from our emergency fund in June to cover the plumbing bill. That doesn’t yet include the sofas we want to buy. It does include upcoming insurance bills we already have the money saved for. We may not need to dip into savings to cover them, which will help replenish the emergency fund.
Second, we figured out how much we plan to spend and when we can realistically expect to do that this year. We also looked at what we expect to be earning once my husband returns to work.
Finally, we looked at the increased budget expenses we expect to have next year.
Then we did the math and worked out what we need to save to replenish the fund and what we have left over to work with.
It’s challenging to have such a huge crimp thrown into our plans. That’s why we have an emergency fund, but we also don’t like dipping into it, because then we have to replenish it! We haven’t quite figure out how we’re going to make this all work, but we’ll find a way. And if we can’t, some things will get delayed. That’s just life.