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What If Your Emergency Is More Than Your Emergency Fund?

4 Minute Read

Early on, Dave discovered people needed cash on hand for emergencies. And they needed it before they started paying off their debts. Otherwise, they’d lean on credit to get through. That’s where the idea for Baby Step 1 came from—$1,000 in a starter emergency fund.

And it works like a dream if your emergency is less than $1,000.

But what if it’s more? What if your car breaks down, your kid needs his appendix out, or your air conditioner goes berserk? Those can be pretty expensive. And it’s tempting to let Visa or MasterCard bail you out.

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But that only adds more stress and more interest to your overall debt! Not good. So what do you do? Here are five practical steps to get you through an emergency bigger than your emergency fund:

1. First, understand what the word "emergency" means.

Your kitchen renovation is not an emergency. Neither is your summer vacation. Neither is your new TV. True emergencies are unexpected, urgent and necessary. Be sure you have a bona fide emergency on your hands before you dip into your savings.

2. Call and negotiate a payment plan.

If your son broke his arm and you’re struggling to pay the hospital bill, call the good folks in billing. Ask about discounts and a payment plan you can cash-flow over the next several months. Be persistent, patient and kind. And pay something up front to show you’re serious about repaying your debt. They’ll usually work with you.

Related: How to Ease the Burden of Medical Debt

3. Shop around.

If your car is on the fritz, shop around. Ask friends for reliable mechanic recommendations and then call about deals, coupons and specials. Be sure the mechanic you pick gives you a quote before you authorize any work. If their price is more than you can pay, ask for the "bare minimum" fix that will get you back on the road safely until you can save for the bigger repair. If it’s absolutely not drivable, check into carpooling.

4. Find more cash.

Sometimes, you just need more cash. New air conditioners aren’t cheap, after all. If you need more money, sell everything you don’t use anymore. Get online and list your old bikes, iPads, DVDs, furniture, kids’ clothes and that third TV. If you still need more cash, start making budget cuts. Say goodbye to cable, Netflix, your expensive cell phone plan, monthly clothing money, and the restaurant budget. If you still need more money, earn it. Look for ways to earn cash by freelancing, babysitting, dog sitting, plant sitting or picking up some overtime at work. There are plenty of ways to boost your income if you’re willing to make some sacrifices.

5. Stop your snowball.

There could be a rare emergency where you need to stop your debt snowball altogether and focus on the here-and-now. We’re talking about really big stuff like losing a job or having a baby. Go back to making minimum payments on all your debts for a while and focus on covering your essentials, like paying for food, transportation and utilities. When life gets back to normal, you can get back to your debts.

Remember, your starter emergency fund is a buffer, not insurance. It exists to help you get through a mini-crisis until you can afford a bigger fix. It’s not supposed to cover every emergency that crops up. That’s what your fully-funded emergency fund (three to six months’ worth of expenses) will do down the road. Until then, follow the Baby Steps in order, resolve to pay cash for everything, and stick to your goals as best you can—no matter how hard it gets. It works if you will.

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