You’ve spent valuable time building up your emergency fund. But when is it the right time to use that money? These questions can help you decide.
A new water heater. A medical bill. A reduction in hours at your job. We’ve all experienced an unexpected expense or event that upends the best-laid plans (and budgets).
If you’re facing a shortfall, you may be eyeing your emergency fund.
But before you dip into it, ask yourself these three questions:
- Is it unexpected? Unexpected expenses include sudden medical bills or repairs from storm damage. Plan ahead for predicable costs like vacations or routine maintenance.
- Is it unavoidable? Unavoidable expenses are those you can't ignore, such as fixing a leaky roof or repairing a broken-down vehicle. Reconsider purchases for things you want but don't need.
- Is it urgent? Urgent expenses require immediate attention, like emergency dental work or a broken furnace in winter. For non-urgent costs, such as new clothes or the latest electronic gadget, try to save up in advance.
Bottom line: Use your emergency fund only for those expenses that are truly unexpected, unavoidable, or urgent, so when a financial emergency does arise, you’re prepared. If you do use some of your emergency fund, it’s OK, just make a plan to rebuild it.
What's next?
We’re here for you when you’re feeling good and not so good about your finances. Get our top tips on building up emergency savings and use our emergency fund calculator.
