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Making large dollar purchases is nerve wracking. I hate spending money and I really, really hate spending a lot of money at one time.
When we purchased our home 7 years ago it was a new build. We were super excited to be in a home that in theory was relatively issue free.
As any homeowner knows, this is a myth.
Our air conditioning unit gave us problems from the beginning. I live in Phoenix, so A/C is rather important.
Every year we’ve had issues with our units and have had to spend anywhere from $129 to $538. It is so frustrating when the issues are on brand new units. Which on a side note, I will never purchase a Goodman AC unit again.
This year, the issue came to a head and we were looking at a $3,200-4,800 repair.
Basic quotes from new units were $6,000 and up. Based on our existing history of issues with the unit we decided to spend the extra money and do a full replacement.
Here is where it gets interesting.
I had six companies give us bids for a new unit. Every single one of the salesmen just assumed we would be financing the unit.
In each case, I asked for a cash discount and was immediately given discounts of 5-15%. This was without any type of negotiation.
So by paying cash, I got an immediate discount and also saved the interest expense from financing the purchase.
There are so many points I can draw from this experience.
The one I want to focus on the long-term impact of an emergency fund on your personal finances.
Let’s just take one quick example.
One of the companies I met with gave me the following pricing for the units:
- 14 Seer Unit – $8,479
- 15 Seer Unit – $9,645
- 14 Seer Unit – $7,699
- 15 Seer Unit – $9,405
As soon as I mentioned we would be paying cash he immediately dropped the prices by 10%
- 14 Seer Unit – $8,479 – $7,631
- 15 Seer Unit – $9,645 – $8,681
- 14 Seer Unit – $7,699 – $6,929
- 15 Seer Unit – $9,405 – $8,465
This was an instant saving of $770 to $964 depending on the unit.
Once I had a baseline cash price, I was able to negotiate with the various companies and ultimately was able to do the install for $5,171.
The lower price was the result of a cash purchase, lots of negotiation and working with multiple contractors. It took a lot of time and research.
I’m pretty sure this is a good price, but at this point don’t tell me if it isn’t. I’m so sick of learning about A/C units I’ll probably cry if you tell me you got a better deal.
Our simple decision to have an emergency fund saved us around $1,000 just based on the cash purchase.
I wish I had discussed financing costs with the guys to get a general idea on pricing, but honestly, just didn’t think about it. I’m assuming that we would have spent an additional $300-800 on interest depending on the terms of the note.
I know that not everyone is in the position to have a fully funded emergency fund. And honestly, if you are still in commercial debt I recommend only having a limited emergency fund while you are working on debt reduction.
I know how hard it is to put money aside month after month for a potential emergency when you are scraping by.
It seems like such a waste when you want to go on vacation or need a new car. Even the simple stuff like grocery shopping often puts a dent in our personal savings goals.
I get it!
Paying yourself first and saving money takes a lot of self-discipline and sacrifice. However, learning to pay yourself first will completely change the way you manage your finances.
However, if you look at the opposite end, can you afford not to make the sacrifice and not have an emergency fund?
Your emergency fund is your protection against Murphy’s Law. If something can break, it will. There are always going to be unexpected expenses.
You will never regret having a little bit of extra money put aside for life’s little emergencies.
We just saved $1,300-$1,800 by having an emergency fund.
Can you really afford not to have an emergency fund after all?
If you need help getting started with your emergency fund I recommend checking out these articles:
PS. If you are in Phoenix we used Air Comfort for the purchase and Dolphin Air for the installation. They were both above average in pricing and service.