piggybank_hammer.jpgMaybe you’ve heard of the modern day advice on keeping an emergency fund. Money in the fund is supposed to only be used for emergencies, but what constitutes a true emergency? Is it an emergency to pay for a school trip that your kid wants to go on? Is it an emergency to purchase that refrigerator because your old one is about to go? It is also a good thing to locate sources of credit, like cash advances, to help in the case of an emergency, but again, what determines whether something is a true emergency or not?

The Big Emergencies

An emergency fund is set up to help you pay for things when life takes a huge downturn. Examples of this are a loss of a job or a medical emergency. There are three big things you always need to take care of: shelter, food, and health. Once these are taken care of, the rest may be inconvenient, but they don’t affect your ability to survive. As long as you’re still kicking, you have the chance to improve your situation.

Some secondary expenses affect your primary expenses. If you lose your job, you can’t pay for your home and you lose your shelter. Similarly, if your car stops working you can make it to your job and you risk being fired. Then, these get bumped up on your list. If your car has problems, then it is an emergency, unless you have a way to make to work using public transportation.

The Inconvenient ProblemsIf the washer or dryer breaks down, these are not true emergencies. It is highly inconvenient, but not an emergency. You can still make it to the laundromat, using your car, which you’ve kept working well, or even borrow a friend’s washer until yours gets replaced.

If you kid wants to go on a trip at school and money is short, it’s not wrong to do without. Field trips are just that – field trips. You may find you can take your kid to the same trip for less than what the school is asking you to cough up.

If your refrigerator gives out, it’s a potential emergency. It can be a health risk if you require refrigeration for medicines or baby food. But you don’t have to buy a brand new one just because the old one gave out. Used appliances are often in very good shape and you can buy them for less.

Potential Benefits

Now, you have to look at the potential benefits too. If you pay your credit card bill on time using cash advances, then you can avoid a $30 late fee. If the payday loan is free because it’s your first time, then you’ve saved $30 using a source of emergency cash, and that makes sense.

If you need money to help file an application for college by the deadline, then this is an emergency. You have a deadline and if the money isn’t there, you won’t get accepted. You won’t get financial aid if you don’t even get accepted to college. In this instance, although it seems to not be an emergency, it actually is because the potential benefit is much larger than the cost of taking out cash advances or other sources of emergency money.

Replace What You Withdraw

When you’ve decided to use your emergency cash or payday services, remember to pay it back to yourself or the lender as soon as possible. You need to have a buffer set up so that you can easily access more money the next time an emergency occurs. This means paying back the payday loan on time and in your next paycheck cycle. Owing a lender makes it harder to avoid your obligation to repay the loan. Owing yourself requires discipline to make sure the money is put back into the emergency fund instead of spent elsewhere.

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