Driving home yesterday my husband and I got into a conversation about paying off a debt in the upcoming months. He mentioned wanting to use a portion of the emergency fund to finish paying off a credit card. I almost stopped right there.
I reminded him that the emergency fund is in place to basically cover us if anything is to go wrong. Something will go wrong. It always does. You do not want to be caught in a place where you depleted your savings.
A credit card should not be used in place of a true emergency fund. So, when should you use the emergency fund?
If something can go wrong, it will go wrong.
It’s kind of ironic because as we continue on the highway home something did go wrong. There were no signs that something was going to malfunction with the vehicle. There we are, on the highway, 5 o’clock traffic in a torrential downpour and the windshield wipers just stop working. The highway is crowded and I am stuck in the middle lane with zero visibility. It was terrifying.
I gradually make my way to the shoulder and turn on my four ways. I try to wipers again, nothing. They are stuck in the middle of the windshield. My husband grabbed a sweatshirt from the back seat and jumped out of the car. He tries to manually move the wipers to get them going again and nothing happens. He was able to get them back into the correct position but they would not work.
We sat on the highway for almost 30 minutes waiting for the storm to pass. Have you ever sat on the side of the highway in the torrential rain during 5 o’clock traffic? It’s scary to see these cars flying down the road, hard to see and praying that they don’t veer slightly off the shoulder and hit you. Okay, maybe that is worst case scenario but no one likes to be stuck on the side of the road. Over an hour later we finally make it home.
This morning my husband calls and makes an appointment to bring the vehicle into the shop. I get out of work and bring it in. I am dreading being called back to the desk. How much is this going to cost me? Finally, an hour later they figure out the problem. $400! $400 to order all of the parts needed and cover the labor cost. I feel defeated.
Should we personally use the emergency fund?
This is an emergency. We live in Florida and it is the rainy season. We are in the peak month of hurricane season and I am blind when I drive if it starts raining. I do believe this constitutes an emergency unless I can cover the expenses some other way.
My husband and I run through the numbers and try to figure out if there is somewhere else we can pull the money from. We could use the emergency fund but at the same time if we have the money in other categories that aren’t necessary we may be able to cover the cost of the repair. We always try to cover expenses from our monthly cash flow before dipping in to use the emergency fund.
When do you use the emergency fund?
This is a hard question to answer. We all have different levels of comfort with our emergency funds. Some people don’t have an emergency fund (not recommended), some people have the $1000 Dave Ramsey recommends, and some people have months worth of expenses. So, depending on your emergency fund level and if you have other money saved the answer may differ.
You need to have set guidelines for your family. When you begin saving your emergency fund decide what is truly an emergency to your and your family. Some say you shouldn’t touch the emergency fund unless you’re in dire need – illness, death, or catastrophe. Other families will use their emergency fund for expenses like unexpected car repairs or home maintenance. You need to decide these parameters for your family.
Sometimes we believe an incident is an emergency. However, the expense can wait a few months to be fixed. If this is the case save the cash and pay for the incident down the road.
Unfortunate events happen – someone loses a job, there is a major unpredictable medical expense, a car accident. You get the idea. Things happen and it can get expensive really quick.
First, Pull from Sinking Funds First
If you haven’t set up sinking funds yet you will want to read this post: Sinking Funds: The Savings Account You Will Love
Sinking funds will cover regular expenses like car maintenance, annual taxes, quarterly dues, larger purchases such as a new appliance etc.
We do not have enough in our car maintenance fund to cover the whole repair. If we did we would not even look at the emergency fund. We will pull from the sinking fund category before anywhere else to cover repairs and expenses.
Sinking funds will cover you on a lot of the smaller expenses that come up. If you know you have car troubles often you may want to set aside more money in that category. Or if you are prone to sickness in the winter, you may want to increase your medical funds.
A sinking fund is meant to help you before a true emergency hits.
If you find yourself in a sticky situation ask yourself these questions before you use the emergency fund
Is this expense unexpected?
Or, Is the expense necessary?
Also, Is the expense urgent?
If you can answer yes to all of these questions it is time to use the emergency fund. The emergency fund is in place to cover you when those unexpected expenses hit. While we try not to use the account it is there when we are in an absolute pinch.
Your emergency fund is necessary just use it wisely.
Have you had to use the emergency fund? Let me know in the comments below!