The Importance of Emergency Savings

I know you have all been patiently waiting for me to get back on top of things and blog again.  I just was busy last week and didn't get around to it.  Anyway, last month we had quite the experience that illustrates a few major points in personal finance.  First, you must live below your means.  If your expenses meet or even exceed your income, you are building a house of straw.  When the first big wolf (aka life) comes along, he'll blow you down.  Second, this experience shows the importance of having and maintaining an emergency savings.  Remember it's not if, it's a matter of when one will happen. 

It all started last month with the great HSA debacle.  I haven't talked about HSAs.  In case you don't know, it stands for Health Savings Account.  I will talk about the benefits of these in the future, but basically they allow you to save for and pay for medical expenses with pre-tax dollars.  We have one through my husband's work.  Without realizing it, we over-funded it for the year and so when his HR manager went to add our contribution, it wouldn't let her do it because of the tax implications.  We are talking about a few hundred dollars.  The paycheck had already been cut so she couldn't just add it back in.  We had to wait until the next pay period to get the missing money.  Normally this would have been nothing more than an annoyance, but that pay period we needed to order my husband's medication.  He has a chronic condition and the medication is very expensive, almost $800 for a three month supply, until we meet our deductible.  Without that money in the HSA there wasn't enough to cover the full cost.  We ended up pulling money out of our savings account to cover the cost and waited to get a partial reimbursement from the HSA and get the rest of the money in the next paycheck.


When this happened, the first thing I thought of was, what would we have done if we didn't have that money set aside?  This would have been a true crisis!  I mean, he couldn't just not have his medication for a few weeks.  I guess this would have been a situation where someone without savings would have put it on a credit card and added to their debt load.  


To finish the story, a few weeks later we got an extra big paycheck and were able to put the money back into savings.  However, last pay period things went wonky again when an error was made because the automatic HSA contribution wasn't changed.  Yet again, we found ourselves shorted a few hundred dollars.  This time we only had to wait a week to get the extra money, but it was still annoying.  Again I thought, what if we weren't in a position to handle this shortage?  So please take a lesson from my story.  Ask yourself what you would do in this situation?  If being shorted a few hundred dollars temporarily completely rocks your world, please make some changes today.  If you don't know where to begin, I'd be happy to help.  This is what I live for!