I’m back listening to the Dave Ramsey podcast at the moment, paying attention to his words of wisdom – and I’m not being totally sarcastic when I say that. This morning, he rang a bell by saying “When it comes to running your own business, there are three rules. Everything will cost twice as much as you expect, everything will take twice as long as you think and the third rule is that you aren’t the exception to the rules.”
Dave would kick my ass all around the room about my current budget and planning, I think. Mind you, I once heard him advise a bloke to save and invest in a way that meant he’d have $8m in the bank by the time he was 85 – for what?! Cocaine and hookers, you’d hope, but Dave, being a bit weirdly religious, isn’t going to advise that.
So why would he kick my ass? Because, at the moment, I seem to spending way more than my income generates on a monthly basis. In fact, I’m gobsmacked myself at the way money seems to be hemorrhaging out of my account in the last few months. This is mostly to do with the house, where unforeseen expenses have recently been slapping me around the head. Firstly, our ceiling fell in due to mice nibbling through the plastic elbows that connect our copper water pipes which run through the floor space between our ground floor and upstairs. “Insurance job”, I thought, which is when I found out I’d taken a £600 excess on the policy and the repair cost was £700. Deep sigh. I had it repaired and, two weeks later, it happened again. Same thing, so not only had I the repair to fund again, I had to get a professional pest controller out to help me find where the little buggers were getting in.
Next thing was the mower. The first grass cut of the year and I just couldn’t get the fifteen year old brute to start. I’d serviced it myself twice last year (thanks to Youtube), but I couldn’t face another summer of fighting with it when £350 would buy me peace of mind in a new mower with a Honda engine. So I shelled out for that too.
Next thing, a real horror story when our pressurised water tank gave up the ghost. No, our insurance wouldn’t cover it and it was just out of its twenty year warranty. It had to go. I’m still waiting for the bill, but there will be no change out of three grand.
There’s a screed of other things that need done to the house too, some of which I can do myself but some which I need to get the professionals in for. For example, I could paint the outside of the house, the decking and the fence, but I might die of boredom if I try. And I don’t fancy risking really dying falling off a ladder trying to get to our top windows either. So I’m budgeting £1,000 for that lump of work.
Then there’s the garden which, given the work I need to do in it, will necessitate a fair amount of spending too. There’s brickwork, which I haven’t the first idea how to attempt, and I have to rebark all the garden flower beds (it’s quite a big area) adding to costs that I know I will incur. I could also do with replacing the garden shed, which is rotting away, but I’m drawing the line at that on the basis that it’s still currently standing. There’s always alternatives to spending money on the garden – it would be fine if I just tidied it up, really – but I’ve been following that strategy for about the last ten years. At some point you have to acknowledge that you need some help with it.
This is the sort of spending that you should plan and budget for, of course. Most of us in the FIRE community know the rules, and even although Dave Ramsey isn’t necessarily a fan of the RE bit, I can hear him demand, “You knew this would happen, Jim, so where in darnation is your emergency fund?”
“Ehrm, well, I kind of invested it, Dave”, would be my response, although that’s not entirely true. I do have cash sitting in the bank, but if you do a quick tally of the above then taking the best part of five grand out of it is not an action I relish one little bit. I was hoping to invest that little sum when the US market drops back under 20,000 points as I kind of think it eventually will. That’s now not to be.
I can’t be the only one, however, who secretly sees their “emergency fund” as an asset that might never have to spent and then has a bit of petted lip when it does. Worse, I’ll have to replenish it now, which is making my petted lip pout even more. I have to admit that I really liked the idea of an “emergency fund” until the day I had to face spending it. Ironically enough, it’s often a new boiler or heating system that’s quoted as being the emergency you might have to find money for in many of the books and articles I’ve read. Discovering that this shit actually does happen in real life hasn’t been any fun at all. As ever, Dave’s rules aren’t for lightweights. He’s serious about the steps you have to take to reach “financial peace” and starting an emergency fund is Step Number One (bolstering it is Number Three.) But I’d slot in a Step 3 (a) which would read, “And do not count your emergency fund as an asset”, as it’s only going to disappoint you later in life when you have to actually spend the damn thing.
Dave Ramsey’s Baby Steps to Financial Peace