Emergency Response System
Life often seems like one emergency after another. Kids get sick, tires get flat, brothers-in-law get arrested and termites get in the siding.
Some emergencies require everything to stop. If the house catches fire, we will not stop to think about the importance of the event. We will get every living thing out of the house and call the fire department before considering anything else. Some emergencies suggest more careful deliberation. A leaking roof should lead to a process of comparing all repair options, from a patch to a replacement. In the meantime, a bucket can sit under the leak. The decision can’t be delayed for months, but you might get a few days before the next rainfall.
Some folks have trouble thinking through all the possible options to emergencies. They rush to the simplest or quickest option without thinking about others. For example, a family that runs short of cash might think about the easiest options first. Running to the payday loan outlet could deliver a quick $500. An emergency loan from the retirement fund might also produce $500 with a bit more work. Selling some electronic equipment or a vehicle may generate $500 and there may be still other options. The key is to consider the real cost of each option and to make sure every option is considered, not just the first one that springs to mind.
The Budget Doctor’s prescription for making emergency decisions is:
1. Judge the seriousness of the emergency. An injured child is a level one emergency. A broken television is a level thirty-four emergency.
2. Determine the time available before acting. For a bleeding wound, it is seconds, but for many emergencies it can be a week or a month. Use all the time available.
3. List the possible options. For a bleeding wound, this may be as simple as deciding between calling 911 versus driving to the hospital. If your television dies, you can just stop watching television completely or visit your neighbor when the American Idol bloopers show is on. Other options may be to fix the television after payday, or to look at the classified ads for an inexpensive used television, or free cycle for a free television.
4. Figure out the cost of each option. $500 borrowed from a payday lender may cost you $2,000 in interest over one year. $500 borrowed from your retirement fund may cost $150 in interest and fees for one year, but result in $5,000 less in funds available at retirement.
5. Pick the best option. Often, this will be the least costly option, but not always.
We all have emergencies and we all need to respond. If you carefully consider the various options and the cost of each, you may save a few dollars. Just don’t think too long about the best way to get to the emergency room.