Comments on: What Constitutes An “Emergency” Where One Should Use An Emergency Fund? http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/ Simple, applicable personal finance advice for the modern world Fri, 10 Feb 2012 08:34:37 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Jane http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-67766 Jane Fri, 07 Sep 2007 13:48:51 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-67766 I basically have a "three tiered emergency fund". The first tier is a savings account which I feel I can use for pretty much anything. The second tier is a Money Market mutual fund which I can use for unexpected expenses ie. family illness, a unexpected great oppertunity, major housing repairs, and I will probably use this money for my next car. (either to buy outright or as a down payment) My third tier is U.S. Savings Bonds these would only be used in case of job loss or any other extreme financial situation. I basically have a “three tiered emergency fund”. The first tier is a savings account which I feel I can use for pretty much anything. The second tier is a Money Market mutual fund which I can use for unexpected expenses ie. family illness, a unexpected great oppertunity, major housing repairs, and I will probably use this money for my next car. (either to buy outright or as a down payment) My third tier is U.S. Savings Bonds these would only be used in case of job loss or any other extreme financial situation.

]]> By: kerry http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-67583 kerry Fri, 07 Sep 2007 03:27:04 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-67583 My husband and I have an emergergency fund. We have 6 months of expenses saved. Everyone thought I was nuts and made fun of me and penny pinching but 1.5 months ago he lost his job. We are not sleeping real well right now but I am so glad I did not touch that fund for anything other then an emergency. So keep up the good work folks. My husband and I have an emergergency fund. We have 6 months of expenses saved. Everyone thought I was nuts and made fun of me and penny pinching but 1.5 months ago he lost his job. We are not sleeping real well right now but I am so glad I did not touch that fund for anything other then an emergency. So keep up the good work folks.

]]> By: Stk http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-65868 Stk Mon, 03 Sep 2007 19:54:31 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-65868 I have defined my emergency activities clearly and have setup an emergency fund and as well as contingency fund, which is 25% of my emergency funds. When emergency happens, be it loss of job, medical emergency, the funds requirement can be best estimated but can never be calculated as per actual need. The contingency fund acts like cushion in case emergency fund fails to cover my emergency expenses I have defined my emergency activities clearly and have setup an emergency fund and as well as contingency fund, which is 25% of my emergency funds.

When emergency happens, be it loss of job, medical emergency, the funds requirement can be best estimated but can never be calculated as per actual need.

The contingency fund acts like cushion in case emergency fund fails to cover my emergency expenses

]]> By: Laura http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64681 Laura Fri, 31 Aug 2007 15:58:08 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64681 I made a decision to treat my emergency fund as such. I come from a family that used the emergency almost every month as a loan' until the next paycheck. WHile it's good to have a cushion, we never had more than a month of expenses saved. I got married and I was determined not to fall into that trap. I'm fortunate to have a husband who likes to save. We have a cushion in our joint account AND have an emergency fund. He has no debt and I have a car loan and a syudent loan to work on. I plan on not touching that money unless it is absolutely neccessary., meaning medical bills, car completely breaking down, etc. I agree with Kaye's reasoning. Thanks for a great post! I made a decision to treat my emergency fund as such. I come from a family that used the emergency almost every month as a loan’ until the next paycheck. WHile it’s good to have a cushion, we never had more than a month of expenses saved.

I got married and I was determined not to fall into that trap. I’m fortunate to have a husband who likes to save. We have a cushion in our joint account AND have an emergency fund.

He has no debt and I have a car loan and a syudent loan to work on. I plan on not touching that money unless it is absolutely neccessary., meaning medical bills, car completely breaking down, etc. I agree with Kaye’s reasoning.

Thanks for a great post!

]]> By: Kaye http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64664 Kaye Fri, 31 Aug 2007 15:28:21 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64664 Here's Webster's definition of emergency: 1 : an unforeseen combination of circumstances that calls for immediate action 2 : an urgent need for assistance or relief I have a narrow range of items that fall into this definition of emergency. Bailing my brother-in-law out of jail comes to mind. Many people use an "emergency fund" as a slush fund, or savings account. My criteria would be the same as Webster's: unforeseen, urgent and immediate. Here’s Webster’s definition of emergency:
1 : an unforeseen combination of circumstances that calls for immediate action
2 : an urgent need for assistance or relief
I have a narrow range of items that fall into this definition of emergency. Bailing my brother-in-law out of jail comes to mind. Many people use an “emergency fund” as a slush fund, or savings account. My criteria would be the same as Webster’s: unforeseen, urgent and immediate.

]]> By: plonkee http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64595 plonkee Fri, 31 Aug 2007 12:44:08 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64595 To me, its an emergency if it has to be paid for now, but it is too much to come out of the regular budget. What actually happens is that I pay for whatever on my credit card and then at the same time withdraw the money from my savings account. I then refill the savings account from my regular salary. To me, its an emergency if it has to be paid for now, but it is too much to come out of the regular budget. What actually happens is that I pay for whatever on my credit card and then at the same time withdraw the money from my savings account. I then refill the savings account from my regular salary.

]]> By: razmaspaz http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64589 razmaspaz Fri, 31 Aug 2007 12:27:14 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64589 I think there are two different interpretations of "Emergency" in your post. You mention illness as an example. Illness is an emergency, but not necessarily of the fiancial kind. Although in your case it sounds like both. I think the point of an emergency fund is for a financial emergency. If you can pay for your monthly expenses out of pocket then you should leave your emergency fund untapped. If your expenses are bleeding onto a credit card, then pull out the fund. I really only consider it appropriate to tap into that fund when the only other option would be charging, or tapping the retirement savings. Of course, this depends a lot on what youe emergency fund consists of. If you have a year's worth of expenses saved, you can probably be a little more liberal with what you call an emergency. If you only have a month's worth, well then you better be sure that you aren't gonna lose your job this month if you tap that money. I think there are two different interpretations of “Emergency” in your post. You mention illness as an example. Illness is an emergency, but not necessarily of the fiancial kind. Although in your case it sounds like both. I think the point of an emergency fund is for a financial emergency. If you can pay for your monthly expenses out of pocket then you should leave your emergency fund untapped. If your expenses are bleeding onto a credit card, then pull out the fund. I really only consider it appropriate to tap into that fund when the only other option would be charging, or tapping the retirement savings. Of course, this depends a lot on what youe emergency fund consists of. If you have a year’s worth of expenses saved, you can probably be a little more liberal with what you call an emergency. If you only have a month’s worth, well then you better be sure that you aren’t gonna lose your job this month if you tap that money.

]]> By: Mukesh http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64375 Mukesh Fri, 31 Aug 2007 01:58:16 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64375 Thanks for the suggestions, I am also in agreement of saving for it in a separate savings account instead of using the emergency fund. But I was planning on getting it done in the fall (usually installers give discounts since that is off-season for them) hence, the curiosity of using the emergency fund. I have a yard almost 150ftx90ft lawn and watering it manually is very time consuming and its hurting the ground around the foundation of the house. Thanks, Mukesh Thanks for the suggestions, I am also in agreement of saving for it in a separate savings account instead of using the emergency fund. But I was planning on getting it done in the fall (usually installers give discounts since that is off-season for them) hence, the curiosity of using the emergency fund. I have a yard almost 150ftx90ft lawn and watering it manually is very time consuming and its hurting the ground around the foundation of the house.

Thanks,
Mukesh

]]> By: Christine http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64332 Christine Thu, 30 Aug 2007 23:18:32 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64332 How I'm using my emergency fund: I keep about $500 in a special wallet for my emergency fund. And I'm using it now, since for the life of me I can't find my purse (which is filled with such marvelous things as a credit card, a debit card, a post it with my ssn, my drivers license, a hairbrush, my glasses cleaner, and some other small things). Not cool. I'm hoping it's in my dorm somewhere, I still haven't unpacked all the way. How I’m using my emergency fund:

I keep about $500 in a special wallet for my emergency fund. And I’m using it now, since for the life of me I can’t find my purse (which is filled with such marvelous things as a credit card, a debit card, a post it with my ssn, my drivers license, a hairbrush, my glasses cleaner, and some other small things). Not cool. I’m hoping it’s in my dorm somewhere, I still haven’t unpacked all the way.

]]> By: SJean http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64318 SJean Thu, 30 Aug 2007 22:25:30 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64318 I find it interesting the different ways people use emergency funds. Some a very strict, some are very loose. I'm pretty lax, its either I save up for a future larger expense (ie, a trip) in a separate savings account or I lump it in the same account as my fund for awhile, but in the end, it doesn't matter where I put the money and pull it from, and whether it is an emergency. I don't buy/do things I can't afford and my savings is growing over time. I find it interesting the different ways people use emergency funds. Some a very strict, some are very loose.

I’m pretty lax, its either I save up for a future larger expense (ie, a trip) in a separate savings account or I lump it in the same account as my fund for awhile, but in the end, it doesn’t matter where I put the money and pull it from, and whether it is an emergency. I don’t buy/do things I can’t afford and my savings is growing over time.

]]> By: Kevin http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64316 Kevin Thu, 30 Aug 2007 22:17:08 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64316 Mukesh, I'd say wait until spring giving you time to save some money for it. Its already September so you honestly won't see much use out of a sprinkler system this year. I don't know how you feel about lawn maintenance but a sprinkler system would never ever qualify as an emergency fund use in my book. In fact its adding a larger liability in terms of a bigger water bill. Mukesh,

I’d say wait until spring giving you time to save some money for it. Its already September so you honestly won’t see much use out of a sprinkler system this year.

I don’t know how you feel about lawn maintenance but a sprinkler system would never ever qualify as an emergency fund use in my book. In fact its adding a larger liability in terms of a bigger water bill.

]]> By: Wendy http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64313 Wendy Thu, 30 Aug 2007 22:12:41 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64313 Mukesh, I would count that as something to save up for over time. If you can't afford to save $250/month for the next year and then have the system installed, then you can't afford to 'restock' your emergency fund in a timely manner. I suppose others might feel differently, but that sounds a lot more like a convenience than an emergency. Mukesh,

I would count that as something to save up for over time. If you can’t afford to save $250/month for the next year and then have the system installed, then you can’t afford to ‘restock’ your emergency fund in a timely manner.

I suppose others might feel differently, but that sounds a lot more like a convenience than an emergency.

]]> By: Mukesh http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64288 Mukesh Thu, 30 Aug 2007 21:04:37 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64288 I have a question. There is mention of using the emergency fund for home repairs... would adding a sprinkler system for my lawn count under that category? I can't afford it, obviously, in my monthly budget (I've received estimates from 2500 to 4K for the job) and I don't want to put it on a credit card, so do I count that as an item to use the fund? Thanks, Mukesh I have a question. There is mention of using the emergency fund for home repairs… would adding a sprinkler system for my lawn count under that category? I can’t afford it, obviously, in my monthly budget (I’ve received estimates from 2500 to 4K for the job) and I don’t want to put it on a credit card, so do I count that as an item to use the fund?

Thanks,
Mukesh

]]> By: Sailsa http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64284 Sailsa Thu, 30 Aug 2007 20:53:35 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64284 When I started my emergency fund I made a list of items for things it would cover including the following: Loss of job (This seems to be the main reason to have an emergency fund to me) Medical Emergencies (This is the area I think has the greatest likelihood of occurring although I would pay with my HSA first) Car Repairs (my car is still under warranty so I don't have much built into my budget for car maintenance) Family emergencies (When I was in high school, my dad lost his job and was unemployed for several months. We all pitched in to help make ends meet (in addition to him using his emergency fund) and I would like to be able to offer assistance to one of my siblings should life throw something unexpected at them) I rent so don't have to worry about home repairs but unexpected housing costs (burst pipes, etc.) will come from this when I own a house. Taking advantage of opportunities (This past year my cousin was stationed in Hawaii by the Army and I was given the opportunity to fly out and stay for a week. Normally I would save up for this trip, but I needed to schedule it for a week when my cousin had off so we could explore the islands together. Therefore I saved for part of the trip and used the emergency fund to pay for the rest. I then cut my other expenses to fill the emergency fund back up over the next few months. Now, this was definitely not an emergency but I didn't want to miss an opportunity to travel to Hawaii avoiding hotel, car rental, and other expenses while visiting my cousin. Having an emergency fund gives me the flexibility to take advantage of situations when they occur that I would otherwise have to skip or go into debt to pay for.) When I started my emergency fund I made a list of items for things it would cover including the following:

Loss of job (This seems to be the main reason to have an emergency fund to me)

Medical Emergencies (This is the area I think has the greatest likelihood of occurring although I would pay with my HSA first)

Car Repairs (my car is still under warranty so I don’t have much built into my budget for car maintenance)

Family emergencies (When I was in high school, my dad lost his job and was unemployed for several months. We all pitched in to help make ends meet (in addition to him using his emergency fund) and I would like to be able to offer assistance to one of my siblings should life throw something unexpected at them)

I rent so don’t have to worry about home repairs but unexpected housing costs (burst pipes, etc.) will come from this when I own a house.

Taking advantage of opportunities (This past year my cousin was stationed in Hawaii by the Army and I was given the opportunity to fly out and stay for a week. Normally I would save up for this trip, but I needed to schedule it for a week when my cousin had off so we could explore the islands together. Therefore I saved for part of the trip and used the emergency fund to pay for the rest. I then cut my other expenses to fill the emergency fund back up over the next few months. Now, this was definitely not an emergency but I didn’t want to miss an opportunity to travel to Hawaii avoiding hotel, car rental, and other expenses while visiting my cousin. Having an emergency fund gives me the flexibility to take advantage of situations when they occur that I would otherwise have to skip or go into debt to pay for.)

]]> By: Heather http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64274 Heather Thu, 30 Aug 2007 20:18:26 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64274 I'm a pack rat by nature, and I have a hard time tapping my fund even during valid emergencies. But (duh) that's what it's for! It's a great idea to think "forward" about when you'll pull that trigger and tap the fund. Also, it's good to plan for what expenses you'll forgo in order to re-fill the fund. I’m a pack rat by nature, and I have a hard time tapping my fund even during valid emergencies. But (duh) that’s what it’s for! It’s a great idea to think “forward” about when you’ll pull that trigger and tap the fund. Also, it’s good to plan for what expenses you’ll forgo in order to re-fill the fund.

]]> By: k http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/comment-page-1/#comment-64264 k Thu, 30 Aug 2007 19:56:05 +0000 http://www.thesimpledollar.com/2007/08/30/what-constitutes-an-emergency-where-one-should-use-an-emergency-fund/#comment-64264 I have "jobless fund" in addition to a general emergency fund, which is for miscellaneous expenses--house repair or unexpected maintenance, car emergencies, emergency travel in case of serious family illness, insurance deductibles, etc. At some point I'd like to separate out the house emergency money because having a separate, largely untouchable line makes me feel more secure, and makes my goals more concrete, but right now, there's not enough in the general emergency fund for there to be much point to pulling separate portions out of the pot. I have “jobless fund” in addition to a general emergency fund, which is for miscellaneous expenses–house repair or unexpected maintenance, car emergencies, emergency travel in case of serious family illness, insurance deductibles, etc. At some point I’d like to separate out the house emergency money because having a separate, largely untouchable line makes me feel more secure, and makes my goals more concrete, but right now, there’s not enough in the general emergency fund for there to be much point to pulling separate portions out of the pot.

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