I Spent My Emergency Fund: Now What?

In the span of just a few weeks this last month, my husband and I faced over $6,000 in surprise expenses. First, our car broke down and needed a new battery, brakes, and rotors, for a grand total of $1,100. A visit to the orthodontist led to a $2,700 bill to fix my youngest child’s underbite. Next up, we had to replace some rotten wood on the back of our home after we demolished our deck.

After that, my youngest child (the one with a new contraption to fix her jaw) fell off a jungle him and broke her left arm. That zapped our health care deductible in an instant, but fortunately she’s okay.

What does all this mean? We spent a big chunk of our emergency fund without any warning at all. It was stressful in some ways, but also a huge relief.

I mean, this is what emergency funds are for, right? They’re made for spending on real emergencies — things like broken arms and surprise car repairs. My kid needing her jaw fixed was something I suppose I could have saved for ahead of time, but it never crossed my mind that a seven-year-old would need braces so early on. That was a surprise for me, and also a learning experience.

When Your E-Fund Takes a Hit

Most experts suggest you set aside three to six months of expenses (not income) in an easily accessible account and designate those funds for emergencies only. The whole purpose of having an e-fund is that, when life happens, at least you don’t have to worry about how to pay for it — and you don’t have to charge your bills on a credit card or struggle to make ends meet. With an e-fund, you have the privilege of paying for your emergencies in cold, hard cash so you can go on with your life without ruining all your financial goals.

Because my husband and I have an emergency fund, our lives and our finances will be just fine. We had three months of expenses set aside already, so we didn’t deplete all our cash funds to begin with. We’ll now spend the next few months replenishing our cash emergency fund out of our monthly pay. It won’t be fun, but it’s a lot better than going into debt over life’s little disasters.

If your emergency fund has been depleted — or you don’t have one at all — don’t be hard on yourself! Your emergency fund exists to help you through hard times, including unexpected bills, medical emergencies, or a loss of pay, but it’s easy to underestimate how much you need or get stuck in a situation where several emergencies hit all at once.

Here are a few steps to take to build an e-fund from scratch or replenish emergency funds you had to spend:

Reallocate savings. If you’re saving money every month for different goals, you will need to reallocate some of your savings back toward your emergency fund for a while. Let’s say you’re saving $200 per month toward a kitchen remodel or a family vacation. If you can move at least half of those funds to beef up your emergency fund each month, you’ll be on your way to replacing what you’ve lost.
Don’t be afraid to start small. If you don’t have an emergency fund already or you aren’t saving money regularly, remember that you must start somewhere. If you can set aside even $25 or $50 per payday or per month and put it in a savings account, you’ll eventually make some headway toward your goal. Dave Ramsey suggests a starter emergency fund goal of $1,000, so don’t be discouraged by the idea of saving up three to six months of expenses. Anything you save for emergencies is better than nothing.
Cut spending temporarily. If you’re using a monthly budget already, you’re probably setting money aside each month for “fun” categories like dining out, movies, and general entertainment. For the sake of building up an emergency fund or replacing money you had to spend, you may want to consider reducing these categories — or cutting them out altogether — until your e-fund is fully funded again.
Create a repayment timeline. Crafting a repayment plan can also help you get on track toward your goal of building up your emergency fund. If you had to spend $2,000 of your savings to pay for a roof repair, and you know you can save $200 per month, you’ll need 10 months to pay yourself back. Write it down and commit to that amount.
Pay yourself first. Also make sure you’re “paying yourself first” before life gets in the way. If you’re using a monthly budget (and especially a zero-sum budget), simply list your e-fund savings as debt repayment and pay yourself like you would any other bill. Also make sure you’re keeping your emergency funds in a separate high interest savings account so they don’t get mixed in with your general funds.
Make it automatic. Making your savings automatic can also help you start on track toward rebuilding your emergency fund. Set up automatic bank transfers for payday or a certain day of the month for your repayment/savings plan, and you can “set it and forget it.”

The Bottom Line

If you had to spend your emergency fund, it’s not the end of the world. But since it takes time to build up adequate savings for life’s “what ifs,” your best course of action is to start saving to replace it right away.

With an emergency fund of even a few thousand dollars, you’ll be in a better position to handle life’s ups and downs, a job loss, a surprise bill, or having to meet your annual health insurance deductible in one fell swoop. Without one, on the other hand, you’re stuck trying to pay emergency expenses out of your regular income. And that could become an emergency on its own.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.

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