Last week, we talked about having an emergency fund.  That got me thinking about how to decide you really need to use it.  Obviously, a new outfit or an expensive birthday gift would not qualify, but the line is not so clear when it comes to other things that we spend on money on.

To me, an emergency that would require me to use the emergency fund should be something we absolutely must have to live.  Things like food, the mortgage and heat are the most critical.  As long as we have food, shelter, and each other, we will be alright.  But there are also times when spending from the emergency fund may make sense even when the things we buy are not necessary for survival.

For example, if you are short on cash but know you will be receiving more money soon, you might borrow from the emergency fund for things such as your child’s tuition, gas for the car or the auto insurance premium.

How you decide to use your emergency funds needs to be a personal decision, but keep in mind that the emergency fund is for just that – emergencies.  Can you imagine what it would be like to find yourself in a real emergency after having spent the emergency funds on things that weren’t so necessary?

The best course would be to hurry up and get an emergency fund going, and then create a basic savings for those other things in life that are not necessary for survival.