There’s all this talk about the importance of emergency funds, but what actually constitutes an emergency? Here are six situations where you should tap into that money to keep yourself from falling into a financial hole; after all, that’s what it’s there for!
Unexpected Medical Expenses
Whether it’s a sprained ankle, an emergency room visit, or an unforeseen surgery, medical expenses can pop up out of thin air; no one is immune to them. If this happens to you, don’t panic! Start by reviewing your insurance policy to better understand what’s covered. If you have a higher deductible, your emergency fund is there to help cover those out-of-pocket expenses.
Job Loss or Reduced Income
Losing your job is one of the most devastating things that can happen to your finances. This is when your emergency fund becomes invaluable. Reassess your expenses right away, ensuring to prioritize essential bills like rent and utilities. Cut back on non-essentials so you aren’t hemorrhaging money from your emergency fund for longer than you absolutely have to. Ideally, you’ll have enough in your fund to take your time finding something new.
Major, Unavoidable Home Repairs
Homeownership often feels like you’re constantly fixing one problem, only to have another one arise. But if you’re faced with a problem that can’t wait, like a broken water heater, this is absolutely the time to dip into that emergency fund. Before you do, get quotes from multiple contractors to ensure you’re not being taken for a ride. Once the repair is complete, consider setting up a separate savings account for home maintenance to avoid future emergencies.
Car Troubles
Car troubles can strike at any time, and they often come with hefty repair bills. And while not everyone relies on their car for everything, it’s the only way for many people to get to work or the grocery store. If your car breaks down unexpectedly, consult a mechanic to diagnose the issue and provide an estimate. If the repair costs are significant, don’t hesitate to use your emergency fund. Just remember to weigh the cost of repairs against the value of your car—there’s no point in sinking money into a vehicle that’s on its
Family Emergencies
Helping out your family isn’t a common reason to dip into your emergency fund. However, it could be in some situations. Just remember it’s okay to help, but not at the expense of your own health and happiness. Assess things carefully before you offer any financial assistance; if your emergency fund is a literal lifesaver for a loved one, then it’s probably worth helping, at least to the point that you’re comfortable. If you don’t have to drain your entire emergency fund to help, then don’t.
Last-Minute Travel Expenses
Whether it’s attending a funeral or helping a family member in distress, last-minute travel expenses can be extremely expensive. So before you whip out your credit card to handle it, consider using at least part of your emergency fund. Don’t forget to compare prices for flights and hotels to ensure you’re getting the best deal possible.
