Friday Financial Tidbit-What’s an emergency?

Having an emergency fund today is paramount in having a healthy financial plan. Unfortunately, most people today are walking around without one. According to a recent survey, almost 2/3 of Americans could not pay for a $1,000 emergency without going into debt to do so. With that being said, what really constitutes an emergency?

When you are first trying to get a handle on your money everything is an emergency. Having no money in the bank to cover unusual expenses will result in monthly mini-crises that will set you back and get you discouraged. But once you get the hang of it and have money in the bank, some events that used to be classified as emergencies turn out to be pretty predictable. Cars do break down every so often, especially older cars. Things in your house break down from the heater to the A/C to major appliances. Accidents do happen in your home. By being able to predict future expenses you are decreasing your chances of having a true emergency.

What constitutes an emergency? From my experience the more money you save, the fewer things classify as an emergency. So if you are tired of having emergencies month after month, sit down, find out where you are financially, develop a game plan to dump your debt, and start to save for your own emergencies. By being prepared you will see a reduction of emergencies.

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2 Responses to Friday Financial Tidbit-What’s an emergency?

  1. I agree that one’s definition of “emergency” changes with time as one’s preparation improves. It’s still tricky for me to define, but I suppose to us an emergency would be a large unexpected expense, or an expected expense so large that it overwhelms our preparations. And the longer our budgeting history, the fewer things are unexpected! We have actually never had to dip into our official EF, although of course we have had to use money from our various targeted savings accounts.

    • Jon White says:

      That’s a great point Emily thank you for stopping by. If you have a fully funded emergency fund and budget accordingly, whenever you do have a true emergency you really won’t have to dip into your fund, you can just take it out of targeted savings accounts instead. We are at a similar point where if we do have an emergency we just pull it out of our car or vacation fund and never have to touch our real emergency fund.

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