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Pricey Dave,
We’ve all our money owed paid off, apart from our dwelling, and our absolutely funded emergency fund of six months of bills is in place. In speaking to individuals, it appears there are many totally different opinions as to what constitutes an emergency. What tips do you counsel when deciding whether or not to make use of our emergency fund?
Ingrid
Pricey Ingrid,
There are three issues to ask your self once you’re tempted to dip into your emergency fund. One, is it surprising? Issues like Christmas, birthdays and even sure payments come round on the similar time yearly. When you’re not already budgeting for this stuff, it’s time to begin. In any other case, you may use your emergency fund for one thing that’s simply the results of poor planning.
Quantity two, is it completely essential? Most of us suppose we all know the distinction between wants and desires, however generally the road will get a bit blurry. In case your automotive goes fully kaput, and also you want transportation, use your emergency fund to purchase one thing inexpensive and dependable you possibly can pay money for. However don’t dip into your emergency fund simply to improve your good automotive for one with one million bells and whistles. That’s a need, not a necessity.
And three, is it pressing? Typically, you could have act like a grown-up. Each concept that pops into your thoughts isn’t surprising, essential or pressing. You possibly can reside that approach if you would like, however the consequence will likely be a shortly depleted emergency fund. Then, what’re you going to do when an actual emergency comes alongside?
Follow the artwork of endurance. Keep away from impulse buys. Pressing issues embrace stuff like a damaged air conditioner in the midst of summer season, a busted transmission or sudden, surprising medical bills. An enormous sale at Wal Mart? No. Live performance tickets? Positively not. That nice new pair of footwear you simply noticed in a retailer window? Give me a break!
Your emergency fund is about long-term safety, not on the spot gratification. Don’t apply it to a whim. However don’t be afraid to make use of it when you actually need to!
—Dave
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