What Really Qualifies as an Emergency?

by Tim on March 21, 2011

If you follow Dave Ramsey, you are aware that your very first priority is to establish a $1,000 emergency fund for those unexpected life events.   The point of this “Baby Step One” emergency fund is to provide you a buffer or fall back while you’re paying down debt with “gazelle intensity”.

But once you have your emergency fund, the question that begs to be answered is: What qualifies as an emergency?

Before you invade your emergency fund, be certain that you can clearly answer this question.  These five tips will help:

1. Is there any slack in the budget?

Is it reasonable to adjust a few of your budgeted categories — or even put a few on freeze — as you save up to cover the unexpected expense?  If so, you’ve turned your emergency into a budgeted category – at least for the time being.

2. Can it wait?

I know some things which seem like emergencies are actually only  inconvenient setbacks.  Are you needing a new TV, computer, or phone?  Will your old phone hold you off for a while?  I just spoke with a lady whose response to a computer crash was to charge $1,800 to get a new mac.  That decision added up to 1/3 of the consumer debt she held and it just added to the mess of debt.

3. How serious is it?

This is where it can be a little tough to decide if it really is an emergency.  Ultimately you’ll need to use your discretion and you might benefit from asking someone’s opinion.

In my opinion…

  • Broken bone…emergency
  • Sore back (paying for a massage)…nope
  • Front door broke….yes, emergency
  • Couch cushion ripped…I don’t think so

4. Do you have a plan to replenish it?

If you absolutely have to use the emergency fund, don’t get upset.  (It’s there for emergencies, right?) Your goal should be to replenish it as quickly as possible.  How you do it will involve some creativity – side jobs, budget category freezes, and garage sales are just a few ideas of how to rebuild that fund.

5. How can you avoid it in the future?

This final question is just as important as the first.  If you’ve built up your emergency fund and don’t want to experience the pain of dipping into it again, try to plan for the unexpected.  If you’re able to set aside funds into a separate emergency fund for auto, home, or health expenses, go for it!

Everyone’s financial situation is different and emergencies won’t be the same for everyone.  If there’s one thing that is the same, it’s that taking the time to ask these questions will help you to think through all of your options before you make the decision to touch your emergency fund.

Have you ever had to dip into your emergency fund?  What was it for?

Tim is a personal finance writer at Faith and Finance a Christian financial help blog that provides financial insights for individuals, businesses, and churches. Outside of finance, Tim enjoys spending time with his wife, playing the saxophone, reading economics books, and a good game of RISK or Catan. Find him on Twitter and Facebook and subscribe to the Faith and Finance RSS feed.


{ 4 comments… read them below or add one }

Derrik Hubbard, CFP March 21, 2011 at 12:22 pm

Thanks, Tim.

Great issues to think through BEFORE the emergency happens.

I think that it would be cool if singles and couples actually wrote down the parameters of what constitutes an emergency beforehand so that they didn’t rationalize a purchase down the road.

Derrik Hubbard, CFP


krantcents March 21, 2011 at 7:21 pm

To me an emergency is something that cannot wait.


Norman March 22, 2011 at 11:59 am

I considered it an emergency when my garage door opener finally bit the dust. I had a new one installed and took the money from my short-term savings. I keep a cushion in my checking that I call short-term savings. This way I don’t have to touch my long-term savings.


Tim @ Faith and Finance March 22, 2011 at 12:59 pm

@ Derrik – That’s a great point. Even though it’s not practical to think up every possible emergency, you can at least set some guidelines to make it easier when they happen.

@Krantcents – Simple. I like it. 🙂

@ Norman – Sounds like you half-expected the door to go out sometime soon. For those cases, having a little buffer is the perfect plan to keep from hitting your long-term savings.

Great input!


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