When to spend the Emergency Fund?

[greekislandgirl]

We've managed to build up our emergency fund to about 3 months survival. I keep thinking of scenarios and wondering "where would we get the money for that?" Then I think "the emergency fund??" But I'm not sure - when do you all think it is appropriate to SPEND the emergency fund (in part or in full).

I was reading this article this morning Save your 'emergency fund' for the real thing - MSN Money and while it says things like "only use your EF for real emergencies," I was wondering what people think those are.

For me it would be something like:

- catastrophic event means we have to evacuate our home
- job loss so that both of us are unemployed
- family emergency in the US means I have to make a trans-Atlantic flight on short notice

But on the other hand, our budget is so tight that if anything unexpected happens, I don't know where to get money from. We just found out from our landlord from last year that a bill came several months after we left for electricity and we have to pay it - well that is not budgeted for and although he didn't say how much it was, I doubt we'll be able to afford it, but the EF is not supposed to be for things like utility bills.

Just wondering what others think of their EF as being for.

[satarac7]

Greekislandgirl,

The list of things you have for "real emergencies" is definitely valid. My view on what constitutes an "emergency" is anything that needs to be paid for that keeps you out of becoming further in debt.

This may sound crazy but once the wife and I got past step 3, we tried to set a cushion in our checking account which has saved us from grabbing from the emergency fund.

Example: Wife gets told she will be going on a 3 week business trip (short notice) but has no laptop to use to communicate with friends and family while out on the road. Although not in the budget, we were able to get her something from the checking account cushion.

[nodmicks]

For us the EF covers unexpected issues. a few we have had to cover recently.

House foundation problems found = emergency.

Tree falling on roof = emergency

basement filling with water = emergency

illness making bills much bigger than our sinking fund account = emergency

another big emergency we once had:

Job loss= emergency

However if my sinking funds for something like say car repairs is drained to zero and I get a car repair bill I would use the emergency fund. It is there for those unexpected expenses. We can budget for a lot but can not see every thing that may happen. I'd feel no guilt using your ef for that bill if that is what you need to do .

[frugal is fun]

I would totally question the electric bill from LAST YEAR...seems a bit odd to be just being told about it, no?

I would get a copy of it with the dates of usuage etc. Depending on how much it is and if it turns out to be yours, offer to make payments. If the landlord just told you about it then obviously its not that big of a deal. I'm not saying to stiff the guy but I wouldn't rush to pay off the entire bill if money is an issue right now.

[Mom2-3]

My view on what constitutes an "emergency" is anything that needs to be paid for that keeps you out of becoming further in debt.

This is how we decide to use the EF. If we can put it off and cash flow, then we do that.

A new dishwasher is a want, not a need. My grandma hand washed dishes and I could too. But, for the tree that falls on the roof, or the car that won't move and you have to go to work. Those are the emergencies (for us)

I think once you start putting money into that savings, it's hard to take it out unless it is a real need. We have many times "forgot" about the EF and found other ways around our problems.

[mndtrp]

An emergency is anything unplanned that can't wait to be resolved once money has been saved up. Tire blowout = emergency fund. New tires = saving until I have enough.

[gmarie]

For us the EF covers unexpected issues. a few we have had to cover recently.

House foundation problems found = emergency.

Tree falling on roof = emergency

basement filling with water = emergency

illness making bills much bigger than our sinking fund account = emergency

another big emergency we once had:

Job loss= emergency

However if my sinking funds for something like say car repairs is drained to zero and I get a car repair bill I would use the emergency fund. It is there for those unexpected expenses. We can budget for a lot but can not see every thing that may happen. I'd feel no guilt using your ef for that bill if that is what you need to do .

What is a sinking fund?

[nodmicks]

What is a sinking fund?

A fund you put $ into every month just like a bill for future expenses. Some of our are car repairs, insurance, home repair, vet bills, etc

[gmarie]

A fund you put $ into every month just like a bill for future expenses. Some of our are car repairs, insurance, home repair, vet bills, etc

Thanks!
I'm curious if DR recommends this as part of a budget?

I do currently save $100 /mo for car repairs. I recently had work done on both cars and didn't have to touch the baby emergency fund!

[dcompton]

I would use the emergency for it - it's a bill and one you couldn't plan for.

It's terrific that you have three months expenses in savings, and I know you would like to keep it there. But a really catastrophic emergency is not likely to happen tomorrow -- and all three months worth at once. It could, but the odds are against it. If you use some for this bill, you can put it back as you can.

The emergency fund is for the unexpected, and it seems to me this qualifies.

[khaski]

I count an 'emergency' as anything we NEED (not want) we don't have the $ for otherwise...like things listed above...and I do love the idea of a 'sink' fund for expenses bound to come up from time to time that aren't a 'normal' part of the budget...like major car repairs, new hot water heater.....we just started a 'sink' fund this year, and know we'll need it soon- our appliances are getting to the age where buying a new one makes more sense than to repair! Hoping to be able to get 'new' ones in the next year or two without touching EF.

Your EF is YOURS- you use it for whatever you deem necessary, but keep in mind the work it took you to get it in place so you don't 'blow it' on trivial things! There's no point in having one if you're going to a) waste it on silly things, having no self control, or b) squander it and suffer, never touching it, because you aren't able to decide what an 'emergency' constitutes.

I know, it's like a whole new step, deciding what to do with your EF.

[Greebo]

Thanks!
I'm curious if DR recommends this as part of a budget?

I do currently save $100 /mo for car repairs. I recently had work done on both cars and didn't have to touch the baby emergency fund!

Oh, he absolutely is in favor of sinking funds. His view and I agree - if you know an expense is coming, it's irresponsible not to plan for it.

[miss_cas]

The emergency fund should only be used in the event of:
1. job loss;
2. Need to evacuate due to a natural disaster;
3. Something breaks in the home ie: roof, storm damage, termites, mechanical systems, plumbing or electrical.
4. The car needs repairs that don't exceed its value.
5. Medical bills copays only if you are out of money in your checking account.

Never take a vacation with emergency fund money. Never give into the pressure to pay a medical 'off'. You just keep sending in whatever you can afford. If the doctor will not treat you because of a high outstanding balance, try changing providers first. It is fine to put the repairs on the credit card and pay it back with the emergency fund because you can't get to the bank. The emergency fund is to be paid back as soon as possible after a 'disaster'.