Funding Emergency Repairs

emergency fund savingsLast week, I shared the logic I used to determine whether I should repair or replace my home air conditioning unit. The repair cost was $400, while the replacement cost was $6,700. Based on my analysis, I opted to repair this time around.

Thankfully, I can go with either option without adversely impacting my finances.

Unfortunately, many U.S. households would struggle with the $400 repair cost alone. While covering a full replacement would be a considerable financial setback.

Typical Household

According to one of the reports put together by the Federal Reserve, 47% of households would struggle with coming up with a $400 emergency expense such as the one in my example last week.

emergency savings households

That’s pretty alarming!

My income provides me the luxury of being able to build up a healthy emergency fund for repairs. However, as I’m about to demonstrate, my ability to do so has nothing to do with income. Here’s my real-life case study to help drive the point home.

A Tale of Two Households

When I purchased my house, one of my checklist items was to get a full year’s worth of utility expenses from the prior owners. Having this information helped me project out my total living expenses, and was an excellent supplemental check on affordability. It also helped me with a reference point after we moved in, especially relative to small improvements we made to address efficiency.

And it came in convenient for this post!

Here’s a summary of how much the previous owners spent on utility costs while they lived there:

utilities prior owners

They spent over $5,000 per year on utilities, which seemed high to me at the time. I felt I could improve on those numbers with a few basic tweaks.

Since I’ve been tracking expenses for a few years, I’m able to compare my actual costs relative to theirs. I took my average costs over those years, and took a look at the differences:

utility comparisons

Compared to the prior owner household, the MYF Household was able to save over $2,300 per year. That’s a savings of 43% overall!

If our household incomes were identical, we would be “making” $2,300 more per year just by overseeing our utility costs and following some good habits.

Since living in the house, we’ve saved a total of over $18,000 during the past eight years.

This is more than enough to cover any repairs on my A/C unit, with plenty left over to cover the total replacement cost of a new unit.

Easy Tips for Lowering Utility Costs

We didn’t do anything fancy to save $2,300 per year on utility costs. We just adjusted a few things that had no real impact on our overall comfort.

We followed many of the recommendations from the Department of Energy when it came to lowering cooling costs.

lowering cooling costs

The main things that helped us reduce our costs compared to the other household were.

Negotiating a better electricity rate – We live in a state where electricity was deregulated a few years back. This means we can shop the rate around effortlessly. However, very few people do this, including the prior owner. They were paying for a higher rate when a simple phone call could have reduced their price overnight. I estimate this accounts for about 30% of our total savings.

Watching the thermostat – After the first year in the home, and some experimentation, we found the home’s “sweet temperature spot.” In the summertime, the thermostat is set between 75-78F. In the wintertime, it’s set between 68-70F. This probably accounts for about 40% of our total savings.

Insulating the attic – The attic had no insulation whatsoever when we bought the house. This was one of the first improvements I made after we moved in. We did simple spray foam insulation and added an attic tent. This likely accounts for the remainder 20% of our total savings.

Training our grass – This might make some scoff, but I’ve been training my grass to need less water during the summers. I hardly water our lawn, and since the grass has had many years to adjust, the roots go down further. After eight years of doing this, I haven’t killed it off yet, and it’s more resilient. I rely mostly on the rain we get each year, and the lawn looks just as good as my neighbors’. This accounts for most of the difference in our water bill and about 10% of our total savings.

Closing Comments

This was just an example of how a household can make adjustments to fund their emergency savings and potential repairs. I didn’t have to stress out about repairing my A/C unit or even replacing it outright. Since my cost control habits took care of my emergency fund over the years. This assumes of course that I banked those savings, and didn’t squander it on something else.

The main point is that I didn’t need to make more money to free up the extra cash for an emergency.

The real emergency is the fact that close to half of US households can’t come up with $400 in a pinch.

Readers, would you be able to come up with enough cash to cover an emergency? Do you monitor your utility costs closely? Any other tips on reducing utility expenses without a significant investment? Share your thoughts and comment below!


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