Even a perfectly planned budget can be thrown off track by a surprise expense. That’s why you’ve carefully set aside savings in your emergency fund.
But what kind of situation can warrant dipping into that fund? Since you’ve dedicated that money to emergencies, you owe it to yourself to make sure you spend it wisely.
From unexpected car repairs to home maintenance, here’s when you should use your savings.
If you unexpectedly lose your job, you still need to pay the bills. Your emergency fund provides you a cushion to keep up with your expenses as you decide what’s next for your career.
What happens if your car breaks down? First, you’ll need to pay your car insurance deductible and figure out any additional expenses related to repairs and a rental. Then, your savings can keep you on the road while your vehicle is in the shop.
Storm or flooding destruction to your home may require repairs as soon as possible. Your emergency fund is there to cover your home insurance deductible and any additional expenses related to the damage.
Where Not to Spend Your Emergency Fund
Remember: Not every unexpected expense counts as an emergency. For example, if you have the opportunity to go on an exciting trip or decide you want to upgrade your phone to a new model, it probably doesn’t make sense to pay for those purchases from your emergency fund.
In addition to your savings, you have insurance to help protect your belongings and your financial security.