Today, I have a special guest post that is near and dear to the heart. I met Liz from Chief Mom Officer over on the Rockstar Finance Forums and she reached out to me about wanting to share her story. I think you will really enjoy and relate to her story. Hopefully you will understand why we think emergency funds are important to your overall financial plan. Without further rambling, I'll let Liz take it away!
Sometimes you might doubt whether having a three to six month emergency fund is really necessary. After all, you're young, you're healthy, your job is pretty steady. Shouldn't you have that money invested instead of easily accessed? Why bother saving up three to six months expenses-isn't that overkill?
I'm here to tell you that an emergency fund can be what will save you when everything else in your life falls apart. By sharing my story, I hope to inspire others who are still working toward their emergency funds to keep going-it will be worth it in the end.
Surgery, Sepsis, and a real Emergency
I've always kept something aside for emergencies, with the thought that it would be used in the event of a job loss. Four and a half years ago, when my husband almost died of sepsis, I got a unique perspective on the kind of comfort an emergency fund can give you in the worst of times.
My husband had walked into the hospital a healthy 36 year old man, for a surgery that was supposed to be straightforward. As the surgeon said "there's a 99% chance he'll be fine!" Unfortunately when there's a 99% chance things will be fine, there's a 1% chance they will not, and there are real people in that 1% chance. That time, it was us. Days after the original surgery, he was not doing well. They discovered an emergency situation that led to another Sunday night emergency surgery. Before I knew it, he was in the Intensive Care Unit, on a ventilator, in a medically induced coma. He would stay that way for a week-they told me he was in something called "septic shock".
Now, septic shock is not something you should Google.
I speak from experience here, because when I did, the fatality figures were astounding. Septic shock has a mortality rate of 50%. Abdominal sepsis (which is what he had) has a mortality rate of 72%. Every day I walked into that hospital and sat by his side, listening to the ventilator breathe for him, and I wondered how I would tell our two young children (ages 8 and 4 at the time) that their father died. I was only 31 years old at the time, and never imagined that it was possible for someone my age to be in that situation.
Fortunately, he didn't die. He was able to get off the ventilator after a week, get out of the ICU onto the hospital floor, and into a rehabilitation center. After a month away, he was able to come home. He wasn't able to climb the stairs, so I brought our bed down with the help of my parents and we all slept in the living room. The kids set up their sleeping bags on the floor, because they didn't want to be away from their dad. Once he was home, there were many more months of physical and occupational therapy. There were medical appointments, visiting nurses, procedures, and another surgery. Recovery was a long, slow, arduous process. He recovered to a "new normal", not where he was before, but much improved.
Financially, this could have been devastating.
His medical bills that year totaled almost $200,000 - after the insurance discount. He had been caring for our children during the day, and now suddenly I had to pay for daycare. He had lost his job in the Great Recession when his factory closed, and was receiving unemployment. Now that stopped because he was unable to work.
On top of medical expenses, there were numerous other expenses that we needed to cover (installing railings in the house, buying assisting tools to reach & grab things on the floor, new clothes, certain food, etc.). When you're sitting in the ICU, or dealing with some other emergency, the last thing you want to worry about is "how on earth am I going to pay for this".
How the Emergency Fund - And Emergency Plan - Saved Us
At the time, I had an emergency fund of about 4-5 months of expenses. Also, we had health insurance (never, ever, ever go without health insurance!). The emergency fund was enough to take care of all the big, one-time expenses. Things like our $7,000 out of pocket maximum on the insurance policy. Or railing installations in the house so he could get around. In addition to the emergency fund, I'd always been a saver and investor. I was contributing to college funds for the kids and putting aside 15% for retirement. My monthly investing gave me the cushion in the budget to deal with this huge financial shock.
Once it was apparent my husband was going to recover, I immediately went into what Dave Ramsey would call "storm cloud mode".
I stopped the college contributions - that added a few hundred dollars a month to the budget. I cut the retirement back to 6% of my salary, still enough to get the employer match. It gave me a 9% raise (I would have cut it altogether, if needed). Those changes, in addition to the emergency fund, paid the $1,000 per month daycare bill until he recovered.
Once things calmed down, and my husband was home from rehabilitation, I took a knife to all our other expenses and cut them to the bone. We already didn't have cable, so there was nothing to cut there. We've replaced the home phone with an Ooma, saving $45 a month. We dropped our Internet and cell phone plans to the lowest possible option. Eating out was gone from the budget, and all food was made at home from scratch. And so on, through all the expenses.
An emergency fund is a great place to start financially. However, it's important to also formulate an emergency plan to back up the fund. In the case of something going catastrophically wrong - whether it's a job loss, a medical emergency, a fire in your home, or something else - the emergency fund is just the start. Having a cushion in your budget by saving, investing and knowing what expenses are optional and can be cut out, are extremely helpful when the worst hits.
Other Things I Learned
I learned a great deal about the importance of an emergency fund and emergency plan. In the four and a half years since that time, I've built the emergency fund up to 12 months of expenses. I also learned:
The importance of being debt free.
At that time, we had a car loan, which was a monthly drain of a few hundred dollars that we just didn't need. Today, we're completely debt free except for the mortgage, and I plan to pay that off in five years. I listened to both Clark Howard and Dave Ramsey's podcasts in the car on the way to/from work for years to keep motivated.
Accepting help from others.
I'm a fiercely independent person and it was hard to accept help, but I knew we needed it. Our extended family was at the house every day while my husband was in the hospital and rehabilitation. They were taking care of the kids (who couldn't visit), making dinner, doing drop offs/pickups. Basically, they were helping us however they could. At work, people stepped up to cover for me while I needed to be out
It can happen to you.
We all like to pretend that because we're healthy, young, or always wear our seat belt, nothing bad will happen. This has shown me sometimes extremely bad things happen through no fault of our own, so you need to prepare. Not only through emergency funds and plans, but also through wills and life insurance.
Life is short-focus on what really matters.
This is something that you hear a lot, but it usually doesn't hit home when you're in your early 30's. But it does for me. This event changed my entire perspective on life, and it also changed how I perceive stressful situations. When I find myself getting worked up over something at work or home, I take a step back and ask myself if this is something that really matters in life. Usually the answer is no-it's something that's going wrong in the moment but won't matter in a month or a year. You can check out the 10-10-10 strategy for a good method to help you focus on what really matters.
A Happy Ending?
Septic shock changed our lives, and the after effects continue to follow us to this day. Just last year, a few months after the birth of our youngest son, my husband had to have another major (reconstructive) surgery. But we don't let any of this stop us from living a rich, full life. I'm laser focused on becoming both totally debt free and financially independent. It will give our family greater security, should something happen to one of us. I'm thankful that we've been given another chance at our life. And I hope turn this terrible situation into a force to inspire and help others on their financial journeys.
Liz is a mother of three boys, two cats, and one dog. She's also an MBA and IT professional helping working moms become the Chief Mom Officer of their household over at Chief Mom Officer. Follow her on Twitter at @Liz_Officer, or reach out through e-mail to Liz@ChiefMomOfficer.org.
What do you think? Does this change your views about how emergency funds are important and your need for one? Let Liz and I know in the comments below! Have a great week!
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Latest posts by Liz (see all)
- The Time Our Emergency Fund – and Plan – Saved The Day - November 28, 2016