Finance Gets Personal

Oh, lord. The hits keep coming.

Back in January, our heat pump (it’s like a combination air conditioner/heater) was making weird noises and our electric bills were really high. I had someone come out and they said the compressor was weak and recommended replacing the unit for $3,000 (it’s 10 years old - about the average life expectancy). Since I didn’t have $3,000, I had a second company come out, and they said there was nothing wrong with the compressor, I just needed a new starter kit for $100. Obviously, I went with the second company.

Well, within a month or so, the heat pump was making noises again and our electric bills weren’t going down. So I switched the thermostat over to the gas furnace, and meant to call them back about it.

Three and a half months later, I finally got around to it (and only because we’ll be needing to use the A/C soon).

Turns out…the compressor is weak and the unit needs to be replaced for $3,000. Luckily, I just so happen to have $3,400 saved up in anticipation of upcoming foundation work. The structural engineer is coming tomorrow, so hopefully he’ll have good news. Then, I’ll start getting quotes for the heat pump.

As for this “baby emergency fund” of $1,000: Given the current condition of our household systems and appliances, we might need to rethink the amount.

Boo!

Photo Credit: Rocks and air conditioner by Sheila Steele, used under Creative Commons licensing

The phrase “living paycheck to paycheck” gets thrown around a lot, but the truth is, I don’t really understand what it means.

Here are some possible definitions:

1. Not having enough money in savings to survive for a reasonable amount of time without a paycheck (i.e., not having a three-month emergency fund)
2. Spending your entire paycheck (or more) and not saving any money (i.e., not making any financial progress)
3. Commiting so much of your paycheck toward debt-repayment and/or savings that you are dependent on your next paycheck to pay upcoming bills (i.e., me)

I’m inclined toward the first definition, but I’m not sure. What do you think?

(This post was included in the Carnival of Personal Finance, hosted by Lazy Man and Money.)

Photo Credit: self portrait as a custom framing consultant by Maproom Systems, used under Creative Commons licensing