We’ve all experienced it at one time or another – something breaks, is no longer usable, or costs more money than we currently have on hand. So what now? Where are those extra funds supposed to come from? Is this the time to dip into the emergency fund, or should you start a savings account so you can work towards solving the problem as you’re able. Here are a few questions you should ask yourself in order to tell the difference.
Is This an Unexpected Expense?
Sometimes life throws us curve balls that we aren’t prepared for. Losing a job or dealing with the aftermath of a tropical storm or earthquake that wrecked havoc on your home are a couple examples. In situations like these that emergency fund will come in handy. You can use the money to make sure your mortgage and utility bills get paid, or take care of that insurance deductible in order to get your home back into order. On the other hand, expenses that occur every year – like Christmas or birthdays – are not a good enough reason to use your emergency fund. Make sure that you save a little money each month so that when holidays or back-to-school season starts you aren’t forced to choose between counting change or taking away from a fund that you may desperately need in the future.
Is it a Necessity?
Confusing want you want with what you need is easy to do. However, it’s an important distinction to make. Fixing your vehicle so that you’re able to get to and from work is a need. Whereas, repainting your ugly living room is a want. Even though you think you might die if you have to look at those awful walls for one more day, repainting them does not fall into the emergency category. Don’t let your wants steal from the money set aside for your needs. You may end up regretting it if you do.
Is it an Immediate Need?
The last thing you want is for an urgent need to arise and to not have the money available to pay for it. If your child gets injured playing soccer then you want to be able to cover the cost without having to stress about where the money will come from. On the other hand, if the chandelier you’ve had your eye on for months is suddenly on sale you need to realize that this is not a good enough reason to use the money that’s set aside for emergencies. This is when that savings account comes in to play. Don’t waste your emergency fund on something that isn’t an emergency!
Even though you may feel that your emergency fund is just sitting there collecting dust it is actually serving a very important purpose. That money is your insurance policy against the unexpected. Don’t spend it frivolously. Having it and not needing it is much better than needing it and not having it.
If you find yourself struggling with debt or would like to find out about becoming debt free, call Debthelper.com at 800-920-2262, or schedule an appointment today.