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What constitutes an emergency?

February 18th, 2008 at 07:40 pm

Another blogger here asked: "Do you consider your emergency fund to cover serious emergencies or 'life happens' type of things?"

Good question and the answer would be ... both.

We actually have two emergency funds. The first one is stashed away in hard-to-access places and contains about $18,000 (depending on what the stock market is doing). It is for true emergencies, which in my book is something like the loss of a job.

The second one is much smaller (but growing) and resides in a money market account that we can access easily. This account is for not-so-dire emergencies, such as the hot water heater breaking or plumbing backing up.

My husband and I often have debated dipping into the big emergency fund. He thinks the need for an oil change for his car constitutes an emergency, while I think you better be bleeding and near death or financial ruin before touching the emergency fund.

Fortunately for me, most of the emergency fund is in the form of my personal stocks and bonds, so my husband can't access it without my consent or a judge's authorization....

8 Responses to “What constitutes an emergency?”

  1. reflectionite Says:

    i would have to say to my bf, if we were in the same situation and he wanted the oil changed, lol, either he do it himself or he can go without junk food or beer for a week! Big Grin

  2. merch Says:

    I have an emergency fund set up for job loss, medical emergencies, a hurrican e destroys my house.

    Your secondary emergency fund, I call maintenance funds in my budget. I have one for the house and one for the car. When I was having furnance issues in Decemeber, I just dipped into the house maintenance budget instead of the emergency fund.

    I think if you approach it as having maintenance funds as oppose to calling it and emergency fund, you get to the essences of what that money is for and you get right size those categories and increas your true emergency fund.

    I would guess that your $18k emergency fund is under funded. Mine is currently around $17k and I am looking to boost to about $40k and I think your lifestyle is higher then mine (from what I read).

    Anyway, good luck. Are you still on top of the cash only spending?

  3. compulsive debtor Says:

    I have about $200,000 elsewhere if I really needed to get to it for an emergency (not including our home equity), so I'm not worried about the emergency fund. And I have massive insurance on my house, myself, my husband, my cars and my dogs, so I'm not worried about a hurricane or medical emergency either. Plus, in a true emergency, I'd scale my lifestyle back to the bare minimum so my expenses would drop drastically.

    And, yes, I'm still on top of the cash only spending since I own no credit cards. But thanks for asking.

  4. merch Says:

    I brought up the emergency fund for hurricane as more of a liquidity crunch. In other words, the insurance may not pay when you need the cash

    My other point was you should just call the second emergency fund, a maintenance fund. I look at emergencies as something unexpected happening. Oil changes, new roofs, etc. are things that are expected to happen.

    And glad to hear you doing well on the cash diet.

    Just my thoughts.

  5. Caoineag Says:

    My emergency fund will cover both scenarios simply because its easier to keep the money together. We just won't let it drain beyond a certain point. That said, we are in a slightly different boat than most people given that we can survive on only one income. A job loss by one of us would not require us to tap our fund. A natural catastrophe would be more likely to require the fund than anything else (but fires do happen so we still do need an emergency part of the fund). Hence, we have a greater focus on the fund covering non-regular expenses.

  6. compulsive debtor Says:

    Now we're getting into semantics. If you want to go there, I should point out that I have separate car funds, house funds, kid funds, etc. They're basically the equivalent of your catchall maintenance fund. Then I have the contingency to the emergency fund, which is what I was originally referring to. It covers those "oh crap" moments when you realize the furnace needs replacing and you're a little short in the house fund.

  7. reflectionite Says:

    woo hoo! my emergency fund has currently about $40 in it! Big Grin
    just thought i'd drop that one in there to lighten the mood!

  8. KellyB Says:

    I have 2 savings accounts where I have several sub-accounts. One is the emergency funds - 3 months of expenses for loss of job, etc. Not to be touched otherwise. The rest of the funds are broken into subcategories like compulsive debtor - house maintaninance, car repair, medical, annual bills such as sewer, tax fees, etc., and then an area for savings for Christmas and vacations. Putting this spreadsheet together and keeping it updated monthly made a world of difference in how comfortable I feel with my finances. Before when I went into savings, I always felt stressed because I thought I shouldn't touch it unless it was a big emergency. Now that I have the subcategories and have them funded individually, I have peace of mind knowing if I need a car repair or home repair there is money sitting and waiting. I have "borrowed" between funds if it goes over, but then I make sure that those funds get replenished before I put anything more into the vacation savings. It has really worked well for me.

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