It came out of nowhere – a pothole the size of the Grand Canyon. Of course I hit it.

Hard.

A few expletives later, I checked the control panel to make sure the tire pressure was okay. It was. Phew!

When I got home, I did a quick check, just to make sure. And there is was – a bubble in the sidewall of my front passenger tire. My stomach flipped, and I immediately felt sick. You see, you can’t fix a bubble in your tire; it has to be replaced. And you can’t just change out one tire – you have to do tires in pairs (see Dad, I did pay attention to your car-care lessons all those years ago).

My mind calculated the cost of this latest setback, likely $300 or more. But I didn’t have to worry. You see, I have an emergency fund.

$1000 in the Bank

After losing weight and decluttering my house, I turned to the last area of my life that was out of control – debt. I read that a lot of minimalists use the Snowball Method to tackle their debt, so I grabbed a copy of The Total Money Makeover by Dave Ramsey and started on Step 1 – save $1000 as quickly as possible.

The idea behind this small savings account is that things happen – things that are completely out of our control and can ruin a well-planned budget. This includes: car repairs, medical bills, home and appliance repair, fines or fees, etc. It does not include: clothing, purses, shoes, restaurants, wine – you get the idea.

Having $1000 in the bank can be the difference between feeding your family and fixing your car!

Think of it as a safety net, insurance against life’s little mishaps. I didn’t want to spend $300 on new tires; I could easily blow that on housewares, but fixing my car is the grown-up thing to do.

Easy Access

I keep my Emergency Fund in an online savings account that offers a higher rate of interest than a traditional bank. I can transfer money from my checking account, and the online savings has a debit card for easy access. The key is to be able to get to your money in an emergency, so a CD or other long-term savings vehicle would not work well here. The purpose of this money is not to make you lots of interest, but to save you from turning to credit in a pinch!

As the first step in my debt reduction plan, the Emergency Fund has saved me many times and kept me from accruing more debt. I can sleep easier knowing that I don’t have to worry, that I have a plan in good times and bad.

How do you handle unexpected expenses? Do you have an Emergency Fund?

Share your experiences in the comments below.