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3 Questions to Ask Before Dipping Into Your Emergency Fund

By Jarrod Heil

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There’s no doubt that a good emergency fund can be there to help you get by in times of need. But there are also situations in life that call for using or not using those funds you’ve been working so diligently to save.

While the first step of emergency funds is figuring out how you’ll save and enacting key tips to help you grow that fund, the next step of the process is knowing when is a good time to dip into your emergency fund.

Even though you set aside your emergency fund for those rainy days filled with unexpected expenses, that doesn’t mean every unexpected expense qualifies to drain that rainy-day fund.

These are three important questions to ask yourself before you go dipping into your emergency fund.

1. Is This an Expense You Weren’t Expecting?

The money in your emergency fund should be relegated to emergencies only. That means only unexpected expenses qualify for a little emergency-fund dipping.

Running out of Buffalo wings and pizza for the big game and having to call the local pizza joint for a clutch delivery may be an unexpected expense, but that doesn’t qualify for an emergency fund withdrawal.

Only major unexpected expenses, such a late-night trip to the hospital and subsequent follow-up doctor visits that quickly exceed a comfortable number, qualify to drain your emergency fund.

Or maybe it’s something like the head gasket of your car suddenly blowing and needing repair to adequately get you to and from work. That’s a major unexpected expense worthy of a dip into the emergency fund.

But what about an automatic renewal of $100 that you completely forgot about. Although it may be unexpected to you at that time, you shouldn’t dip into the emergency fund for it.

You should properly budget the amount in your checking or savings account and spend it when necessary.

Large expenses like a downpayment for a home, yearly home insurance premium, car insurance payment and things like shouldn’t qualify for money from your emergency fund.

But getting an unexpected speeding ticket, or having to replace the washing machine because the old one broke down does qualify.

So before dipping into your emergency fund, you must first ask yourself if the expense is a major cost that you weren’t expecting and had no way of knowing it was coming.

2. Does It Need to Be Paid in Full Right Away?

Chances are good that an unexpected medical bill needs to be paid right away, or at least within a month or two before the collection agency comes calling.

In this instance, you may need to dip into your emergency fund to pay your deductible or the co-pay associated with your visit.

However, if you receive a major bill for $1,000, don’t be afraid to call the biller and ask if you can pay the amount in separate chunks over two or three months  without accruing interest.

There’s a decent chance they’ll allow it. In that case, you may be able to hold onto that emergency fund you’ve been working so hard to save for.

But if your car breaks down and you need some expensive repairs immediately, the auto repair shop probably wants their money before you get your car back. In this case, it may be time to dip into your emergency fund.

For major unexpected expenses that must be paid in full right away, you’ll also want to assess the situation, figuring out if it will cost you more in the long run if you don’t pay up now.

If it does cost more in the long run, whether accruing interest or late fees, it’s probably better to bite the bullet and cough up the money right away.

After all, you’ve already incurred one unexpected expense. What’s the use to add fuel to the fire and cost yourself even more money in the interim?

3. Are There Other Options?

Despite having an emergency fund to pay for unexpected expenses, sometimes it’s more important to keep that money in a safe place and evaluate other options.

For instance, if you get a medical bill for $200 but you’ve also been putting off selling some clothes you never wear anymore, it could be the perfect time to liquidate part of your closet.

By generating other options, maybe downsizing some of the things you don’t need or use anymore, you could help your emergency fund stay healthy (and maybe even contribute to it more)!

If your car breaks down, ask yourself if you truly need it right away to get to and from work each day.

If your area offers public transportation, is walkable or bikeable, or you can get a ride from a coworker, it may be worth it to do that for a few weeks. You’d be saving money on transportation that you could then use to fix your vehicle.

Just because your emergency fund is there for rainy days, that doesn’t mean you can’t create a makeshift umbrella during the situation to save yourself some more dough — and save yourself from draining your ever-important emergency fund.

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