Having an emergency fund is commonly accepted (and good!) advice. When to spend it is addressed less often. To make it simple to decide when to use it, define what it’s for first.
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Not all emergencies can be predicted, but many can. Car repairs, medical expenses, higher-than-normal bills. Even having a list of things that you can and cannot spend an emergency fund on can help you stay on track and avoid spending it when you shouldn't. As personal finance blog Money Ning explains:
Your first step is to figure out what counts as a true emergency. The fact that your TV broke and you'd like to get a new big flatscreen doesn't qualify as one.
"You should identify what a typical emergency for your household at your income level is," says Lesavich. This means you should consider what it might cost to fix a car, buy a new washer, or pay dental bill. "For many people, just putting $100 a month is enough to get a good start on these types of emergencies."
Exceptions will always happen and if something devastating happens that you didn't predict, you obviously shouldn't feel like you can't spend money you need simply because you didn't know you'd need to. However, establishing boundaries first can help prevent you from fudging the numbers later.