Saturday | February 5, 2022
Step 4 – EMERGENCY FUND
Roadblock #2 – What is an “emergency”?
A friend calls and says her grandparents are offering their Florida condo to her for a week for free! All you need to do is purchase a plane ticket to get there. You find one for a decent price, but you know your cash flow cannot handle the expense. Your budget is tight and there is very little wiggle room as you strive to meet your obligations and pay down debt. But then you remember there is $1700 in your “emergency” fund …
Three words … DON’T DO IT.
When you first begin to set aside money for an emergency fund, it is important to establish what constitutes an “emergency”. Generally accepted uses include expenses that are unplanned, unexpected or unforeseen such as car repairs, home repairs, medical expenses, or loss of income. It is helpful to make a list of what you consider to be “acceptable uses”. If you are single, share this list with a friend for accountability. If you are married, come to an agreement with your spouse. Whenever you consider withdrawing money from your emergency fund, especially for a situation that isn’t on your list, consult your friend or your spouse. We also suggest keeping your emergency fund in a separate account.
There will always be temptations … a trip, a concert, a sporting event, an extravagant gift for a loved one, a larger TV, a newer cell phone … and the list goes on and on. Deciding ahead of time what qualifies as an “emergency” can keep you on track and help you avoid making an emotional decision in the heat of the moment. Trust us … you will be thankful when a true “emergency” arises.
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Content from Crescendo Interactive.
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