As with any curious and intelligent creature, our horses have a tendency to find ways to injure themselves, come down with colic or infections, or simply need a new blanket during the middle of winter! Common sense tells us an emergency fund can help us to maintain profitability during these unexpected times while allowing us to provide the best care. Establishing such a fund can be challenging since owners preoccupied with everyday expenses, never mind the overwhelming theories of how much to save. Despite the challenges, your financial health is an essential consideration as an owner/breeder or when expanding your lot.
Our past experiences show a high probability that when a horse comes down with something, there may be more than one issue. Combinations of treatments, vet visits, supplies and medication quickly eat away at any cash reserve. When clients ask whether to have an emergency fund, without hesitation we explain this is a MUST. Below we outline three factors to consider when developing your emergency fund.
Three Factors to Develop Your Equine Emergency Fund
First, determine the maximum deductible you could have to pay, assuming the horse is insured. Usually, the deductible has to be paid immediately, and most veterinarians require a sizable deposit before services commence. It can take a few weeks until the insurance company reimburses you, so knowing the amount of cash you need, and keeping a fund for veterinary emergencies will allow you to move forward with the care your horse needs.
The second consideration is to determine how much cash you would need to care for your horse if your employment or circumstances changed. How long would it be until things are back to normal? Three months? Six months? For example, to establish a three-month cushion, you would need, at minimum, funds to cover the monthly board, feed and other horse costs times three.
Lastly, consider how you will establish your emergency fund. If funds are tight, using a budget method, incorporated into your overall finances, works well to build your fund. You can start by automatically setting aside a designated amount (e.g., $25.00) each month, transferred to a savings account. Most banks allow automatic transfer, which is an easy way to consistently increase or get started on an emergency fund.
Weighing Emergency Fund Approaches
Many horse owners we speak with tend to rely on a credit card to cover emergencies. The danger is that cash is still required to pay back the credit card debt; meanwhile, interest accrues. One season of emergency needs could mean years of trying to recover financially.
Generally, an automatic transfer is probably the best method to build your emergency fund. Since the overall costs of owning a horse can wear on your financial health, a dedicated and consistent process allows you to always have a buffer.
Toward Equine Industry Financial Health
Our next post will discuss how to create a business plan build the financial health of your horse business. Creating a clear business plan, consulting financial experts, and establishing an emergency fund all work to build the financial health of your equine business. This will allow you to keep your focus on caring and enjoying your beautiful horse!