You have been doing really well and saved money for an emergency. You have pinched pennies. You have cut corners. You have avoided the temptation of the Chai Latte. Now, you are looking at an emergency and wondering – Should I dip into my emergency fund?
Everyone has a different definition for what constitutes an emergency. When it comes to your emergency fund, however, the distinction should be clear. An emergency is going to fit these criteria.
One-time unexpected events are things you can make contingency plans for, but you cannot predict when they will happen. Annual occurrences like holidays and back-to-school time you can plan ahead and budget for.
An emergency will be something that you cannot do without. If you are in an accident or your car suddenly breaks down unexpectedly, you need your vehicle for work.
If you have mold in your house or termites, you need to get that addressed right away. Things that you need to make it to work and live healthy are the things you need your emergency fund for when something goes wrong.
Use the emergency funds for things that simply cannot wait. The broken bone, the emergency medical procedure, these are things you have to take care of right away.