Not Ready For Toys Yet

Mindy and David are calling because David wants to use income from selling a piece of equipment to buy an ATV for work. Mindy isn't sure this is a good idea because their emergency fund isn't full yet.

QUESTION: Mindy and David in Illinois are calling because David wants to use income from selling a piece of equipment to buy an ATV for work. However, Mindy isn’t sure this is a good idea because their emergency fund isn’t full yet. Dave thinks David doesn’t need any toys until their emergency fund is finished.

ANSWER: We don’t buy things that aren’t necessary when we don’t have an emergency fund funded. It’s a toy at that point—a business toy or a home toy, whatever you want to call it—but it’s a toy. No. I’ve got boats. I’ve got Sea-Doos. I’ve got toys all over the place, but we don’t buy toys when we don’t have an emergency fund in place. That’s the basics.

Once the emergency fund is in place, then there’s another issue. Let’s pretend the emergency fund is in place, and there’s another argument in this if I understood it right. That is that necessarily we can take income we make from any source and just decide we can put it over here on the side to do a toy deal with. I’m more than fine buying the four-wheeler after the emergency fund’s in place. I have no issue with that at all as long as you pay cash for it, but I’m not going to tell you to do that based on some kind of income. If you can take $1,000 after the emergency fund is in place and turn it into $4,000, you should just go do that for your family. Once that’s done, then in the family budget, which includes all sources of income, can we afford a four-wheeler? Then you look at that, and you might not be buying a $4,000 four-wheeler. You might be buying a $2,000 four-wheeler—a used one, in other words.

You get the emergency fund in place, and the income is not tied to the toy. They’re separate. David, I’m sorry. You lost on every one of these votes. You guys are doing awesome, so it won’t be very long before all of this is a non-issue. It’s not like it’s going to take you two years to save up the money and be finished with the emergency fund. It’s just a matter of the order and, if you will, the philosophy of the thing. The order is the emergency fund is first. The philosophy is the income and the toy are not tied to each other. The good news is with your fabulous income and your track record for plowing through debt, you’ll finish up that emergency fund and save the money for the four-wheeler in no time. You’re just probably coming for the request just a little bit soon it sounds like.

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