Using Your Emergency Fund Wisely: What Qualifies?

No matter where you stand in life, emergencies can rear their head at any time. If you are not prepared for them, they can devastate your finances in such a way that it becomes near impossible to recover yourself. That’s why an emergency fund is a must-have for every household. 

Typically, an emergency fund carries 3-6 months of your usual household expenses. These funds can help you get out of financial challenges, cover medical issues, and take care of your home. But some people make the mistake of digging into their emergency fund when there’s no reason to do so, and end up burning their safety net themselves. 

To help you stay safe from this fate, here’s when to use your emergency fund. 

Home Repair

If you own a home, it’s a given that you may run into repair issues all of a sudden. This makes it crucial that you prepare for emergencies as a homeowner. Your emergency fund lets you do just that. By using your emergency fund, you can immediately perform necessary repairs for issues like broken roofs or leaky pipes. But you need to remember that your emergency fund isn’t there for renovation projects like a bathroom remodel. 

Car Accidents

Car accidents can take a heavy toll both on your health and your wallet. Insurance companies may use auto glass software or estimation solutions to compensate you, but you often have to fight tooth and nail for the payout. If you have a high deductible, you have to muster up your own funds to get care and repairs. That’s where your emergency fund can be extremely helpful and empower you to steer clear of debt. 

Medical Problems

Illness comes for everyone, and it could also happen suddenly. Even with an insurance plan, you often have to cough up a large amount for your copay. For many people, medical debt is the straw that breaks the camel’s back and leads them into a financial dead-end that’s hard to make it out from. Your emergency fund can be a great support and play a major role in your recovery. You can then use solutions like a printable budget binder to rebuild your savings.  

Emergency Vet Visits

Medical emergencies are not limited to humans. If you are a pet parent, you may also have to deal with pet emergencies. Since emergency treatment bills can run pretty steep even with pet insurance, it’s a perfectly valid reason to break into your emergency fund. This ensures that you don’t have to wait until it’s too late. At the same time, you need to stay on top of rebuilding your emergency fund so it can help you with future challenges as well. 

Loss of Employment

If you lose your job or have to shelve your business, your emergency fund can help you stay afloat. Besides keeping a roof over your head, it can also come in handy with your utility bills, grocery costs, car payments, and loan payments. You can also prepare for these challenging situations by learning how to control your spending. This can make a world of difference in helping you support yourself and your loved ones between jobs. 

Income Shortfalls

Sometimes, you may not lose your job entirely but still see a reduction in your income. This is especially true for self-employed people who work in seasonal industries. If this seems to be the case, you can turn to your emergency fund to fill the gap between your income and spending. With that being said, you should only do this after cutting down all non-essential expenses. This way, you can survive and take care of your family while you find better opportunities on a staffing platform. 

Equipment Breakdown

In case you run a business, work from home, or depend on your car to do your work, equipment breakdown can put a stop to your income stream. This is where using your emergency fund to repair or replace your equipment can help. At the same time, you need to learn how to manage your finances without getting into debt. This helps you strike the elusive balance between using your emergency fund and replenishing it in a timely manner. 

After going through this quick guide, you can make an informed decision about when to use your emergency fund. This can prepare you to handle some of the toughest challenges in life with the confidence you need.