When Should I Use My Emergency Fund?

emergency fund

3 Important Questions.

Dave Ramsey is one of the best names in the financial world. He gives practical, useful advice to free yourself from debt and live a better life, starting immediately.

His rule for choosing when to use your emergency fund consists of three questions.

Is it Unexpected?

Is it absolutely Necessary?

And last, but certainly not least…emergency fund

Is It Urgent?

When an immediate need arises, the last thing you should worry about is how you’re going to pay for it. So if your child catches a baseball with his face and needs stitches or your just-replaced furnace suddenly dies in the dead of winter, don’t stress. Focus on the task at hand and leave the rest up to your emergency fund.

Big sales, however, are not urgent. Just because your favorite appliance shop is having the closeout sale of the century doesn’t mean you deserve a new washer, dryer, oven and fridge. If you want to replace old but still-functioning appliances, flash all that cash you saved up in your savings fund and see what kind of deals you can score.

If You Have to Use the Money, It’s Okay!

Your emergency fund may feel like a ton of money just sitting there doing nothing, but it’s actually doing a lot. It’s your insurance policy against the unpredictable. So don’t drain it just because you see something shiny and new.

On the other hand, give yourself permission to use your emergency fund if you have an immediate, unexpected expense. Just remember to replenish your savings as soon as you get back on your feet. You never know when you’ll need it next.
– via daveramsey.com

When NOT To Use It

There are plenty of completely logical situations in which you have to put your emergency fund into use – a car repair, medical expense, or even a pet emergency.

But there are also plenty of times in your life when you may look at that pile of money, tempted to use it on something you want, rather than something you need.

Below are a few of the things people are most often tempted to spend their emergency fund on, wasting money they could use for better purposes down the line.

5 Things to Not Use Your Emergency Fund On

Since everyone’s financial obligations and daily obstacles can vary dramatically, being able to tell whether something is an emergency situation can be difficult. However, by knowing which expenses can be addressed simply by shifting day-to-day spending, you’ll be better at determining when to break the lock off of your emergency savings fund. Here are five times you shouldn’t tap your emergency fund.

1. Holiday Spending

The National Retail Federation estimated that the average holiday shopper spent over $800 on gifts in 2015. No matter how much or little you spend over the holidays, you should never tap your emergency savings for gifts.

2. To Start a Business

Over time, you might build up quite a bit of savings in your emergency fund. And while starting a business can be a costly venture, you should never take money out of your emergency savings to pay for one.

3. A Home Down Payment

While your home might be a great investment into your future, draining your emergency savings to help buy one can lead you to financial disaster. If you’re a first time homeowner, you’ll quickly find numerous hidden costs in homeownership, from property taxes to maintenance. Your emergency fund should help manage those hidden costs if your budget falls through.

4. Home Remodel

A home remodeling project can be a great way to boost equity in your home; it can also lead to a whole slew of other problems. One faulty plumbing error in your bathroom remodel can cause a whole mess of damage to your home. Save your emergency fund for when these types of problems come up.

5. Vacation

Even if you come across a vacation package at a steep discount, your emergency fund is not a vacation fund. You should be saving separately for vacations, no matter where you plan on going.
– via GOBankingRates

How much do you keep in your emergency fund?

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