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Ask Dave

Murphy Moved In

Brian and his wife had to dip into their emergency fund. Now their vehicle needs $1,500 in repairs. Should they fix the vehicle or buy another one?

QUESTION: Brian in Sioux City and his wife are debt-free but the house, and they're adopting their fifth child. Their emergency fund was fully funded, and in order to finish the adoption, they had to dip into it. Murphy moved in, and now their vehicle needs $1,500 in repairs. Should they fix the vehicle or buy another one?

ANSWER: If you spend $1,500 on the car that you have, after you've fixed it, it's worth $1,000? You wouldn't spend $1,500 for a car to be worth $1,000. That doesn't make sense. You would sell that car with the blown head gasket. Then we'd put that with some of the money in the emergency fund and pay cash for some kind of a get-around car. That's going to put you pretty slim on the old emergency fund. I'd be really leaning in to get that fixed back up fast.

You have a blown head gasket. That is, by definition, an emergency. This is not a fixable car. The only question you need to ask yourself is if this $4,500 car you're looking at is the right thing, or is there a $2,500 car out there that leaves you without so much damage to the emergency fund and later you save up and move up in car after you've repaired your emergency fund? That might be more conservative and safer, but you're not describing anything that puts your family completely in jeopardy.

As you've found, when you touch the emergency fund, it sends out a Murphy invitation. As long as you leave it alone, he seems to stay away. But as soon as you dip into it for something, he piles on. They come in threes, and you've only had two. That scares me a little. You're not doing anything that's crazy here. You're going to have $2,500 left in there after you buy the $4,500 car and do the $3,000 expense on the adoption. That's a little slim, but it's not down to completely scary, and you're not borrowing money. These both are legitimate things. You're not in Crazyland. You're just kind of in a little bit of a scary place. I think you do something like you're talking about doing.