By now hopefully you understand the importance of having an emergency fund. It is there to protect when something unexpected comes up in your life that affects your finances. The key here is that term “when”. Financial setbacks will happen at some point, it is just a matter of time. So knowing that they will happen reinforces the importance of having an emergency fund.
But the real issue many people have is determining what an emergency really is. On the surface it sounds fairly obvious, but you would be surprised at how many times people determine that a want is a need and use their emergency fund to pay for it. So in this post I am going to walk you through 5 examples of emergencies that aren’t really emergencies. They are simply wants disguised as needs.
5 Emergencies That Are Not Emergencies
#1 Needing A New Outfit For An Event
You just got invited to a wedding and need a new dress. Does this qualify for an emergency? What about if you have a job interview and need to get a new suit to impress the people interviewing you?
Neither of these are emergencies. In both cases, you can simply wear the outfits you currently have. If you want to look good, spend a couple of dollars to get them dry-cleaned. But other than that, you don’t need to raid your emergency fund for a new outfit for an event.
If you think people will notice that you wore that dress to a wedding a year ago, you are mistaken. Most people won’t. The very few that do will only do so because it left a positive impression on them.
And if you think a designer label suit is going to get you the job, it won’t. It is up to you to get the job, not your outfit.
#2 Needing A TV That Is On Sale
You want a new flat-screen TV and the sales right now are incredible. Should you use your emergency fund to buy that TV? The answer is no. Wanting a new TV is not an emergency. Heck, even if your current TV breaks, it is not an emergency to buy a new one. You can live a little while without a TV.
If you really want a TV, you should be saving for it separately. Once you have the money you need, then you can wait for a great sale to buy it. But you should not be using your emergency fund to buy the TV because that is not the reason for the emergency fund in the first place.
#3 Buying Your Child New Sports Equipment
I know, your child really wants to play lacrosse this year but the cost of the equipment is going to set you back. You could save and let them play next year or just take the money from your emergency fund. What do you do?
As much as you want to give your child everything, realistically you cannot. It is best to sit them down and explain that they can’t play this year but maybe next year. While they will be upset for a short time, they will get over it. They are kids and will find something else rather quickly.
By not using your emergency fund to give them what they want, you are teaching them a valuable life lesson as well. In the instant gratification world we live in, we expect everything now, even if that means going into debt for it. By delaying the purchase, you teach your kids to be smart with their money and improve their financial futures.
#4 Needing A Vacation
Work has been rough and the kids are running you around like crazy. All you want to do is to get away. You see a great sale on a trip to the Bahamas and think about using your emergency fund.
Guess what? This is the same example as the new TV, just with the TV being replaced by a vacation. You shouldn’t use your emergency fund to get away, even if you really, really need to.
Save your money up separately so that you can take (and afford) the vacation. Trust me, there will be other great vacation deals that come along.
At the very least, you could splurge by sending your kids to a friends or grandparents for a night and just relaxing (and maybe spending the weekend in bed?). You could even save up a small amount quickly for a nice massage to de-stress. No matter what you choose, just don’t pay for it with your emergency fund.
#5 Needing A New Car
It doesn’t matter if your car is breaking down or not, your emergency fund is not for buying a new car. You should be saving for this expense separately. Now, you can use your emergency fund if the transmission blew and you need to repair your car.
Let me be clear: you can use your emergency fund to repair your car, just not buy a new one. Even with repairs, fixing your current ride is a lot cheaper than shelling out the money for a new car.
In all of the examples above, raiding your emergency fund is a dumb idea. Think for a minute about what would happen if you were to use the money in your emergency fund to buy a new outfit or TV and two months later you lost your job. Or what if your car broke down and you needed to get it fixed so you can get to work.
Trust me when I tell you that if you use your emergency fund for non-emergencies, things like the above will happen and you will be in a world of hurt because you don’t have as much money to get by.
Don’t fall for the trap of using your emergency fund on wants disguised as emergencies. Think long and hard as to what really constitutes an emergency and only then use your money in that account to help you get by.