4 Questions to Ask Yourself Before Using Your Emergency Fund

4 Questions to Ask Yourself

Before Using Your Emergency Fund

An emergency fund should be just that – for emergencies. Big or small, it’s impossible to predict every expense that will come your way, but having an emergency fund is a great way to ensure you are prepared, no matter what.

What exactly constitutes an emergency can be a bit of a grey area, so when it comes to using your emergency fund, be sure to ask yourself these 4 important questions first.


Is it an unexpected cost?

A last minute trip with your friends or a bathroom remodel do not count as emergencies. While it can be tempting to use the money in your emergency fund towards lifestyle expenses, this should be avoided at all costs. Being that the purpose of an emergency fund is to financially protect you in a real emergency, getting into the habit of using these funds for other expenses will leave yourself vulnerable.

Instead, plan to use your emergency fund only when absolutely necessary. For things like vacations or home improvements, open a separate savings account to make contributions towards and work these goals into your budget.


Is it an absolutely necessary cost?

Was this truly a cost you didn’t see coming, or was it something you avoided saving for? Holiday shopping does not count! New school supplies for your kids do not count! Taxes do not count! These are all expenses that occur annually and should be accounted for in your budget. You’ll thank yourself when a real emergency comes your way and you have the means to prepare for it.


Is it an urgent cost?

If you can afford to wait in order to give yourself a bit of time to save up for this cost, then consider doing so. After using your emergency funds, it will take some time to rebuild them, and you don’t want to leave yourself stranded if an even more urgent expense were to come up before you had a chance to beef your emergency fund back up. Depending on the type of expense, you may be able to negotiate payment terms rather than having to pay entirely upfront, so it’s always worth asking this question.


Can I find another way to pay for it?

Before you rush to withdraw all your funds, take a deep breath and consider whether this is the best decision financially. There may be other means of paying for your emergency that have little or minimal consequences. For example, there are credit cards that are specifically designed for veterinary and medical expenses and offer 6, 12, or 18 month no-interest periods, allowing you some time to pay off your expense rather than draining your emergency fund. Whatever you decide, just make sure you’ve allowed yourself a few minutes to consider whether this is in fact the best decision in your scenario.

Life will always be full of surprises – whether it’s a sick dog, a broken down car, a ripped pool liner, or refrigerator that’s seen better days – an emergency fund will help you bounce back in no time, rather than setting you back in piles of credit card debt. If you have to dip into your emergency fund at some point, don’t fret! That’s what it’s there for, and as long as you’ve asked yourself the above questions first, you’ll know you’re making the most responsible financial decision. Just be sure to continue making contributions towards your emergency fund so you’ll be ready for the next curveball when it comes.

Leslie Tayne

Leslie H. Tayne has more than 15 years' experience in the practice area of consumer and business financial debt-related services. Speaker, Author of Life & Debt, Attorney and Founder of the Tayne Law Group, P.C., Leslie is working towards reshaping the debt industry by offering real, proven solutions to help her clients get back on the road to financial freedom.

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