Financial Tip of the Week

Financial Tip #4

Keep a financial reserve.... enough money put aside for an emergency.

I do not know what your emergency will be, but you will have one. Ours was the loss of our beloved van.

We had planned to keep it running for years to come. But alas it died. So.... we needed cash, like right now!

The choice was a used van or a new van. As we reviewed in Quicken what we had truly spent on repairs to the van over the years, no matter how much we loved the van, the styling, and upholstery, the ride, etc.... it became obvious that we were really just emotionally attached. The van had cost us way too much money in repairs over the years. So, buying another Chrysler Town and Country simply did not make much sense.

Our friends have have Honda Odysseys over the years and have loved them. So we priced out a used one through numerous dealers in the Kansas City area. Wow, they really depreciate slowly, just like my friend Steve said. Not like the used Chrysler products we also looked at.

But, if we were to spend that much, lets just toy with a new van... and low and behold, dealers really are willing and anxious to make a deal during this economy, just to sell a car. We are able to get a new Honda Odyssey for almost the same money as a 2 year old one would cost.

Bottom line, the money in our emergency savings went a long way to help pay for the van and the dealer gave me $2000 for my old van, which they had to go get from the repair shop. Not a bad deal!

The importance of the emergency savings was obvious to us. Now we will spend time this year building it back up. Without it, we would be looking at a 6% car loan and would have probably settled for a used van, and still would have spent about the exact same money.

The emergency savings you build will help in real emergencies as well as help you make better financial decisions when they are needed.