Have an Emergency Fund
as a Hedge Against
Unexpected Expenses and Loss

All people, especially professional drivers, need an emergency fund to help carry them through difficult circumstances or times of unexpected loss.

These may include times of severe weather (especially in the winter),(1) a truck accident,(2) or being dumped by a trucking company (like Arrow Trucking did in December 2009).(3)

For the purposes of this article, we will discuss only the financial portion of emergency preparedness, the rest of which we intend to cover more fully elsewhere.

Credit and Cash

Credit may be unavailable or (if the power is down) inaccessible during an emergency. You will want to keep at least enough cash on hand to meet your minimum needs for 72 hours.

If you find yourself stranded such as Arrow truckers were and needing to get home apart from your truck, you will most likely need a vehicle with enough storage space to transport all of your belongings. Since many of today's professional drivers make their trucks their homes, we are going to assume the need for a lot of space, and therefore figure on renting a minivan to transport all of one's belongings.

Vehicle Rental Reality Sets In

Vicki took the liberty of researching how much money it would take to go the farthest distance in the continental United States for which a rental vehicle (such as one would get at an airport) is available. Using Google Maps and Expedia, she was able to determine that likely extreme locations in the USA are Seattle, WA, and Miami, FL.

The distance from Seattle to Miami by Google Maps' default route is 3,353 miles.

At the time that Vicki did this research (December 2009) –- and for the week of dates she selected (middle of January 2010) –- the total price (weekly rate plus other fees and taxes, not including fuel) of renting a minivan one way from Seattle to Miami ranged in price from about $1,600 to $2,400. Renting an SUV may cost more or less depending on the size of the vehicle and the rental agency.

Assuming an average fuel usage of 15 miles per gallon, a 3,353-mile trip would take more than 223 gallons of fuel to complete. At an average cost of, say, $3.00 per gallon, that is $669 more. So, it is safe to say that based on prices around January 2010, one would need at least $3,000 just to drive the trip (not including hotel or motel rooms along the way or the cost of food). Of course, car rental agencies require customers to use a credit card. They will not accept cash.

A Truck Fund is Not an Emergency Fund

We're not suggesting that you take $3,000 in cash with you on the road, although having a truck fund in your vehicle is certainly advantageous for paying for things like scale tickets and tolls (unless your company utilizes PrePass and E-ZPass).

Is an Emergency Fund the Same as an Income Reserve Fund?

Unless you live in a third world country, you cannot survive for very long off the $3,000 target amount that we calculated above just to pay for the trip home.

In addition to that amount (or line of credit), we strongly recommend that you set aside an income reserve fund to carry you through a period of six months to one year. Your calculation of how much you need will depend on much you currently spend right now on everything (home, utilities, truck, food, insurance, etc.). Save your reserve and designate it only for use in times of dire emergency. Some people like putting cash into other investment instruments, but whatever you choose should be easily accessible. Some people like putting their sensitive financial materials in a fire-resistant safe like the one shown.

If you are not yet to the place where you have an emergency fund, we recommend that you start setting aside money for one immediately.

In this day when many truck drivers are losing their jobs, it is more important than ever. It is wise to have at least six months' worth of income set aside to get you through a difficulty. In the event you lose your job, you will probably want to pare back to the bare essentials. You will want to make a personalized plan that will work for you. Counting on deprivation may work well for a solo and unmarried driver, but may not work well for a married driver with a family back home.

If you need help with developing a budget, please see our budgeting page.

Conclusion

We recommend that you:

• Be debt free. If you're still making payments on your truck, endeavor to pay it off as soon as possible.
• Have a reasonable amount of cash on hand at all times (you decide how much).
• Have a credit card with enough of a credit line to handle your reasonable vehicle rental needs in case you need to make an emergency trip home with all of your belongings.

Remember: The sun doesn't always shine. There are sunny days and rainy days.

The point is: make a plan in advance.

Don't wait to start an emergency fund. Even if you can spare only $20 per week, set a goal and work at meeting it. You can have the best intentions in the world, but if you don't follow through, it may come back to bite you when you least expect it. Follow through. You can do it!

Money saving tip: Consider the wisdom of paying cash -- that is, not paying for things with credit and thus also incurring interest charges -- for goods and services during times of loss or unexpected expenses. The old saying that "cash is king" comes to mind; if you have cash, you might even be able to negotiate lower prices on some things. You can only do this if you have an emergency fund in place.

References:

1. http://www.newson6.com/Global/story.asp?S=11640701
2. http://minnesota.publicradio.org/display/web/2009/12/04/truck-driver-dies/
3. http://www.ktul.com/news/stories/1209/689598.html (removed since page was published)