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First you scrape, save, and sell stuff to get your $1,000 emergency fund in place. Then you pour on the hot coals and fight to pay off all your debt (using the debt snowball method). Once that’s done, you get an extra job to build up your full emergency fund of three to six months of expenses. The key word there is "emergency." You don’t want to blow the cash on something that isn’t an emergency. And you certainly don’t want your emotions to trick you into thinking a purchase is "urgent" when it’s not.
You don’t want to blow the cash on something that isn’t an emergency.
Whether you have the funds in place or will soon, watch out for these five types of emotional purchases that can zap your money.
1. House Renovations
Thanks to HGTV and DIY Network, do-it-yourself remodels have never been more entertaining—until they’re yours. The formula starts with a simple bathroom retile, which turns into a nasty mold removal, which turns into a leaky-pipe replacement, which turns into, "I don’t care how much it costs! I just want it fixed now!"
Your emergency fund is not a savings (or contingency) fund. If you need to make home repairs, set up a budget so you don’t dip into your savings. Plan a cushion for unexpected costs like treating the nasty mold, or even hiring a few pros to finish the job.
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2. Celebrations and Vacations
Yes, your little princess only turns 5 once, but does she really need a kingdom of inflatables, a three-tier castle cake and a fairy dusting of Disney princess impersonators? No!
Don’t let the excitement of party planning run away with your rainy-day savings. You can scale down the food and decorations and still be awesome parents. Why? Because you’re showing your child that you love them and want to spend time with them on their big day. They love attention from you. That gives them more joy than a bouncy castle ever could.
And before we blame it all on the kids, what about those vacations and anniversary getaways? By all means, go out, but don’t go all out until you can afford it. Save up and pay cash, then book your room with a view.
Related: How to Pay Cash for a Vacation in 90 Days
3. Big Household Items on Sale
An old dishwasher, television, or mattress is tempting to replace. Seeing a new model on sale can drive you to dip into your savings. After all, it’s smart to pay less for a costly item—most of the time. So when do you take money from your reserves?
Ask yourself if your house is livable without the item. The honest answer determines if you buy or not. A heater going out in January is an emergency, so put your savings to use. But you can wash dishes in the sink until you can pay cash for your next dishwasher, whether it’s on sale or not. Don’t be pressured by a deal that’s about to run out. Oh, and about that mattress—flip it over or buy a mattress topper!
4. Pet Surgeries
We love our pets, so this one is a little tricky. But if 15-year-old Fluffy Kitty "needs" a lump removed, get a second opinion.
And if you do decide to operate, don’t be afraid to shop around and ask for cash discounts. Then, try to work the cost into your monthly budget instead of making a hasty decision and breaking the piggy bank on your four-legged family member.
5. Out-of-town or Destination Weddings
Even if you like your extended family and friends (and we hope you do!), don’t be guilt-driven into overextending yourself in honor of Cousin May’s big day.
Let’s get real: She’s going to have a good time whether you’re there or not. So unless you’re in the wedding party, don’t be afraid to send your regrets.
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A gift should smooth over her disappointment—and that’s a whole lot cheaper than an all-inclusive trip to Tahiti.
Related: Will You Be My Bridesmaid? 4 Questions to Answer First
Bonus: Family Loans
We know you don’t get a vacation or new dishwasher from this one, but it’s still important to mention. Emotions can run high when you’re dealing with family and money. You want to help them. The key is to do it the right way. Never give money from your emergency fund. Also, don’t let family members borrow money from you. It only strains the relationship. If you give cash, give it as a gift instead of a loan. Even if your hyperactive brother-in-law is itching to start yet another new business. This one, he assures you, is the best idea since the pet rock. And because he’s so generous, he’ll let you get in on the ground floor.
If his bright idea is that good, he can work his tail off and raise the capital he needs without your help. Don’t ruin yourself—and definitely don’t ruin your relationships—by loaning money to family.
When it comes to your emergency fund, check your impulses at the door and avoid dipping into your safety net on a whim. Use it only as a last resort. And when you really need it, you’ll be glad it’s there waiting to catch you.
Need help starting an emergency fund? Want to know the next financial step after saving three to six months of expenses? Financial Peace University can help in any part of your journey. Learn more here!
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