August 27, 2012
We can quickly lose money when we’re scared, and I’m not even talking about the kind of scared that would happen if someone held you up! Instead, I’m talking about the kind of scared that can happen when the stock market is plunging, when someone is sick, or when we feel we’re in some other emergency situation.
Our fight or flight instinct can cause us to make bad decisions, but it can also cause us to make the correct, but expensive decision.
What would happen if your loved one was sick (parents, spouse, children, etc)? Would you delay the life-saving surgery because you wanted to find a better deal by shopping around? Heck no! There are times in life when overspending will happen because it’s necessary and/or we’re scared.
We’re going through one of those situations right now since we live in New Orleans… just in case you haven’t heard, we’re currently in the direct path of Tropical Stormicane Isaac. If you watch the national media, you’d think it’s pure chaos down here with “Katrina-like” conditions already ensuing. Well, it’s not really that bad.
Most of my neighbors are looking forward to the event with grills prepared and alcohol purchased. Apparently, “hurricane parties” are all the rage. This is our first one to go through so I’ll let you know!
When we went to the store to buy supplies yesterday, things weren’t so calm and we definitely saw some anxiety related overspending. In fact, we even saw it in our own cart and yours truly was the culprit! My first overspend came at Ace Hardware because it was “convenient” and spending twice as much as I needed to on batteries seemed smart. It didn’t help when the guy in front of me bought the last two 8-packs of the same “D” batteries I needed! Oh yes, the power of scarcity.
My wife wasn’t thrilled with my purchase, but she was in the car so she couldn’t stop me. My next overspend came at Wal-Mart when I loaded up three bottles of butane for my lantern when I probably already had enough at home! This put my wife on alert. As we were walking down the main aisle they had a whole crate of giant boxes of Gold Fish and she said let’s get some… and I agreed… and then she put me in my place and told me to get my spending under control! I didn’t realize I was being tested!
It’s very easy to get caught up in the moment and suddenly realize we “need” all of these things to get us through. At least I wasn’t like the guy behind me who spent a couple of hundred dollars on a new rifle – which I’m sure he had in his budget this month!
What’s the point of this whole post? Sometimes even the most budgeted-minded individuals can’t control their wallets when they’re put in an emergency situation. The best way to deal with this is to have an emergency fund. The last thing you want is for all of your bad decisions to stick around for years because you overspent on your credit card.
Your initial emergency fund should be $1,000 in an accessible savings account. After you have this and you pay off all of your consumer debt, you should then fund 3-6 months worth of expenses in another savings account. Read more about this and how to Nuture Your Money Tree.
The latest update while writing this (Monday night) shows Isaac staying pretty weak when it hits New Orleans, so hopefully all of our extra spending will be in vain. However, we’re ok with it because as Benjamin Franklin said, “An ounce of prevention is worth a pound of cure”! Also, this was the water aisle a couple of hours after we bought ours (thanks Deepak):
Have you overspent on an emergency? If so, let me know about it in the comments. Also, I’ll try to keep my Twitter and Facebook accounts updated during the storm, so check them out!
Want to take control of your life? – subscribe to receive my updates: SUBSCRIBE
Like my Facebook Page at: Your Life, Their Life
Follow me on Twitter at: YLTL