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3 Questions to Ask Yourself Before Dipping into Your Emergency Fund

Most of us have experienced a financial emergency at some point in our lives. They may be relatively minor—a tire goes flat, or they could be significant—a huge medical bill hits. But whether minor or major, we all run into unexpected expenditures. And whether it is our cars breaking down or a random house repair, we can avoid stressful times through some financial preparation.

An emergency fund is one of the best tools around in financial management because, while it’s important to have a strong offense in building wealth, you equally need a strong defense.

According to the 8 Money Milestones, we want to have an introductory emergency fund of at least $1500 that should sufficiently cover most minor emergencies. However, once you have paid off all your debt (besides your mortgage) and are receiving your company’s match (if you have one), it’s crucial that you increase that emergency fund to 3-6 months of living expenses to protect yourself from a job-loss level emergency.

But when do you use your emergency fund?

It’s important we determine what constitutes an emergency and not a want. Siphoning money from your emergency fund for wants leaves you in a financially fragile position. An emergency fund in not meant to be tapped for anything other than, well, an emergency.

Here are 3 questions to ask yourself before you dip into that emergency fund that you worked so hard to save up:

1. Is this urgent?

Does this need to be fixed or bought right now or can we wait and save up for it? If a so-called emergency can wait, it most likely doesn’t fall into the “emergency” category.

2. Is this necessary?

Sadly, our purchases and debt struggles demonstrate a lot of people struggle with distinguishing between a need and want. A new car is not a need but a want. If you need transportation now, use your emergency fund to buy a cheap, used car and then start saving money for a more reliable vehicle.

3. Is this really an unexpected expense?

An emergency fund at the end of the day is to protect ourselves from going into debt. There is a huge difference between getting fired and forgetting to save up for Christmas presents. Birthdays and Christmas happen the same time every year, so these are not considered unexpected expenses, no matter how poorly we have prepared.

These questions will prevent you from using emergency funds on things that don’t fall into that “emergency” category. If you can ask yourself these three questions and answer “yes” honestly to each one of them, go ahead and use those funds for that emergency. Once the emergency has been removed, do everything in your power to fill it back up to where you left it. There’s nothing worse than spending your emergency fund on a non-emergency only to find out that you don’t have any more money for an actual emergency.

Make sure you have sufficient savings, so that in times of scarcity, you can still give generously, save wisely, and live appropriately.


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