Last week, J. Money wrote about feeling guilty for using your emergency fund. And I realized that this is me! I never touch my emergency fund. This month, I had some very unexpected vehicle expenses after my car broke down while traveling for a funeral. I had some money in my “Car Expenses” YNAB budget category, but not enough to cover. So what did I do? I went over budget in that area and then pulled money from other budget categories to cover. It still didn’t cover enough, so for the month of October, I’m over budget.
(Quick YNAB overview – you live on last month’s income. Overspend, and it just means that you have less to spend the following month – but it’s money you have. You’re just spending this month’s income as well.)
I do have an emergency fund set aside that is a few months worth of expenses. But I didn’t touch that. I think in my mind, because my emergency fund is set up as a number of months worth of expenses, that it’s to be used only if something happens and I suddenly don’t have an income. But that’s just one possible use for my emergency fund. While it’s good to not touch the emergency fund, it’s silly to be struggling to make ends meet in my current budget because I have this mental barrier against using the fund.
My emergency fund earns a good amount of interest every month at ING Direct. I could designate the interest that’s earned every month as a secondary emergency fund, one that I am allowed to use for situations where I still have my income but unexpected events led to higher spending. I’m not sure how that helps, but mentally, it makes me feel less guilty.
Of course, perhaps half the problem is that my Emergency Fund is currently called “Don’t Touch” in ING Direct. I set myself up to feel guilty for spending that money!