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Ask Dave

Using Their Emergency Fund

Joshua and his wife sometimes have a busted budget because of home improvements. He wants to take money from the emergency fund, but she wants to take their fun money to make up the difference.

QUESTION: Joshua in Tennessee and his wife are working the Baby Steps and have their budget in place. Sometimes their budget gets busted because of the home improvements and various things they are doing. He wants to take that excess money from the emergency fund, but she wants to take their restaurant and fun money to make up the difference. Who does Dave side with?

ANSWER: Overspending should not be an emergency. On this, I’m going to side with her, but the big thing is to find out why you’re overspending. If you budget a set amount, you must have something to cut you off and keep you from running over on those home improvements. You have to calm down when you are in Home Depot.

You can use the emergency money and call this an emergency. If it’s happening repeatedly, it’s really not an emergency anymore. It starts to be a predictable event, so you need to set aside more for home repairs or maybe not run your home repair budget quite so close. You have some slush money there for contingencies if you have a problem.

Overall, month to month, if you bump into something such as having $200 budgeted for car repair and the repair turns out to be $250, I would prefer that you take it from somewhere other than the emergency fund. If you say that you’re just going to cut back on restaurants this month because you have to fix the car. That’s how we did it, and we didn’t touch the emergency fund except for big stuff or real scary emergencies.

For little ticky-tacky stuff like flu shots, we didn’t hit the emergency fund for that. We simply adjusted some of the other categories more like your wife is suggesting.

There are three or four answers here. Both of you could be right. Overall, I don’t want this happening repeatedly. What that tells you is that you need to adjust the way you are doing your home repair budget to give yourself more room.

You can do it either way, depending on how big it is. We try to take the small stuff out of other categories like your wife would. If that happens repeatedly, we try to adjust how you’re building the budget so that we don’t get hit every single time with it.