When Should You Dip Into Your Rainy Day Fund?

We frequently remind our readers to establish a savings account to provide quick access to funds in an emergency. But what qualifies as an “emergency” exactly? When should you dip into your rainy day fund, and when should you find another way to cover unexpected expenses?

First of all, we should state the obvious: Some things are not emergencies, no matter how urgent they might feel to you. Never dip into your emergency fund to pay for the following:

• Vacations
• Debt
• Any type of “fun”purchase (yes, even if you want it badly)

As for other unexpected expenses, follow this line of questioning to determine whether dipping into your rainy day fund is advisable.?

• Is this absolutely necessary? Or can I get by without this expense??
• Is this the only way to pay for the expense?
• Is this unexpected and imminent, or do I have time to prepare for this?
• Is this expense urgent, or can it wait?
• How much of my emergency fund will this require (it’s best to avoid draining the account)
• How long will it take me to replace this money in my emergency fund?

And remember, some unexpected expenses can feel urgent, but there might be another way to cover them. For example, a sudden and large medical bill should never simply be paid without questioning it. Make sure to review all of the charges to be certain they are correct, and call the biller to inquire about arrangements. You can often negotiate a lower amount, or at least a payment arrangement so that you aren’t forced to dip into your emergency fund.?

And when all else fails, sleep on the decision if possible. You might wake up tomorrow and realize this urgent expense is not so urgent after all.?

For more information on financial preparedness, call us to schedule an appointment. We can help you establish a plan for long-term security so that you can weather any storm life brings your way.?