If you’ve worked to build an emergency fund, you’ve likely set some rules for yourself, like committing to a set contribution each month or not pulling from it to cover vacation or home renovation costs. So, when the day comes that you need to use the money you’ve worked hard to set aside, you might feel hesitant about how to proceed.
If you’re needing to tap into your emergency savings, but are apprehensive, we’ve compiled five tips for effectively managing and using your emergency fund below.
Before you make the first withdrawal, make a plan, if possible (there may be some emergencies that don’t allow time for planning before taking initial action). This plan doesn’t have to be complicated – in fact, it can look similar to a regular budget. Some things to consider:
Once you’re ready to start tapping into your fund, set guidelines for yourself on how you’ll use it. This may seem clear cut once you’ve identified what the money will be used for, but there may be ways to streamline your spending.
You shouldn’t feel bad about having to tap into your emergency fund, but at the same time, you should look around for sources of help. Depending on your circumstances, there may be other forms of help or assistance you qualify for that would allow you to cut back your reliance on your emergency fund.
For instance, if you’ve lost your income stream, you may have access to free community resources, such as a food or diaper bank. If you’re a small business owner, your local Chamber of Commerce may have tips on support for small businesses facing financial hardship.
Maximizing all available resources can help you preserve some of the cash in your emergency fund for other expenses in the future.
There are a few things to keep in mind when you’re regularly pulling funds from emergency savings:
After your emergency savings has taken a hit, it can be empowering to put a plan in place to rebuild it. You may not be able to put it in action right away, but planning ahead can have you ready to get started once you’re able.
If you know, or can realistically estimate, what you’ll earn when you go back to work, you can draft a budget using your anticipated income and expenses now. Take a close look at bills and other spending. Factor in your emergency fund as a bill you pay to yourself each month to help keep it top of mind.
Whether you’re facing an emergency or not, it’s always the right time to practice responsible money management and learn how to maximize the products and services your financial institution offers. For more money management tips and to learn how to make PSECU’s products and services work for you, visit our blog.