Here Are Situations Where You Should Use Your Emergency Fund
Many are living with reduced income or without one entirely during the coronavirus pandemic.
Small businesses and restaurants are facing foreclosures. Emergency situations like this one really happen. This is just one proof that emergency fund is really important.
Emergency funds are used to give you a backup plan to pay for these kinds of situations, especially when these events disrupt your way of life. An ideal emergency fund is at least three months' worth of expenses in a liquid account.
Emergency funds are always talked about; however, some people are still clueless when is the right time to use your emergency fund.
Here are some situations that would rationalize you withdrawing some money from your emergency fund:
Unexpected Job Loss
About 18 percent of American workers have experienced lost hours or layoffs during the coronavirus pandemic, according to Business Insider.
In addition, one in four households making less than $50,000 annually has experienced lost hours or layoffs.
Losing your job or having a reduced salary during this time is a proper reason to dip in your emergency fund to pay for housing and food expenses.
Medical Emergency
Paying for medical needs can be one of the most expensive expenses you will have to spend. While there are health insurances available, sometimes it does not cover all of the medical expenses, especially if you need a surgery.
Using your emergency fund to pay for medical expenses might save you from going into debt.
Reports said that people who were suspected to have coronavirus earned huge medical bills, even those with health insurances.
Unexpected repairs
Fixing a broken-down car can cost a lot, especially if the expense was unexpected. For instance, a tire can blow out or some faulty functionality might be found during the regular maintenance checks.
Your home might need repairs too, such as replacing a water heater, fixing broken windows, or replacing your roof.
A major repair might also come up unexpectedly, which your emergency fund can help shoulder.
Buying new appliances in case of a major breakdown can also be included in home repair emergencies you can use your emergency fund on.
When Not to Use It?
These situations should not be a reason for you to use your emergency fund. Instead, it is best that you set up another type of savings fund for these expenses and goals.
Here are those situations:
Vacations
Vacations are needed once in a while to loosen up stress and relax. These can be expensive and you might be tempted to use your emergency funds.
It is best to save up for your dream vacation, instead of using all your emergency funds for this.
Starting a Business
You probably decided to quit the corporate world once and for all and starting a business might be in your mind. But your emergency fund should not be used for business expenses.
Your business does not have a hundred percent of success rate, and if you use all of your savings for your business expenditures you might be left with nothing.
It is best that you start a side hustle in order to save money for your future business.
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