Is It Wise To Use Your Emergency Fund During COVID-19?

Life is full of uncertainties! Who knew that this deadly coronavirus would make our lives miserable? The COVID-19 pandemic has impacted the global economy and our country is no exception! A humongous number of people have lost their jobs. And many others have got a pay cut due to massive losses in businesses. However, is it wise to use your Emergency Fund during Covid-19?

In short, most of the people in our country are financially affected due to this pandemic! So, in this situation, an emergency fund can be your savior! This is the reason why the financial experts stress building an emergency fund

If you can build a substantial amount of emergency funds, hopefully, you will be able to handle an emergency in a better way!
The rule of thumb says you should have an emergency fund consisting of your expenses for at least 5 to 6 months. By doing so, you will be one step ahead of leading a financially stable life ahead! So, if you have an emergency fund, you might be tempted to use that money! But should you tap into your emergency fund during the COVID-19 pandemic? Let’s see!

Have you lost your job?

recent Forbes article reveals that almost 50 million people in our country have filed for unemployment benefits!
So, if you have lost your job, you can use your emergency fund for your basic expenses. Besides, you should file for unemployment benefits for receiving financial support.

Have you got a pay cut?

Many organizations are slashing the salaries of their employees due to massive losses in business because of the COVID-19 pandemic.
If you are getting a pay cut, it might be quite difficult for you to cover your basic expenses. So, in that case, you can tap into your emergency savings for your necessities!

Is It Wise To Use Your Emergency Fund During COVID-19 to pay for any repair works?

Well, sudden car damage or repair work of your home is a common affair! But these sudden repair works can create a hole in your pocket if you don’t have any emergency savings!
So, you can use your emergency fund for auto or home repairs to cover those costs!

Is It Wise To Use Your Emergency Fund During COVID-19 To Pay Medical Bills?

A 2019 survey by Springer shows that about 137 people in our country have faced financial hardship due to medical bills. Eventually, they might have fallen prey to the medical debt too!
So, if a medical plight occurs like an emergency room visit, you can use your emergency fund without tapping into your savings! Thereby, it can help you to stay away from medical debt as much as possible.

But before you tap into your emergency fund, I would suggest you analyze your financial situation first!
If your job is secure during this pandemic, most likely, you can pay your bills and cover necessary expenses. So, in that case, you should not tap into your emergency fund. Rather, you can try to put more funds into your emergency fund to handle any exigency in the future!
However, if you have lost your job or getting a pay cut, or are somehow financially affected, it’s better to use your emergency fund than tap into your savings account!
But remember, don’t spend your emergency fund in one go! You need to stay disciplined with your money, especially during this pandemic situation!
So, try to stretch your emergency fund to use it for a longer period. For that, you need to keep the following things in mind:

Things to keep in mind

 Try to stretch your budget to save more money! Relook your budget and chalk out the unnecessary expenses that you can cut down. By doing so, you will be able to save a bit more money during this crisis. 

⦁ If you are unemployed, file for the unemployment benefits asap! If you are eligible, you can get cash benefits from the U.S. Department of Labor. 

 Talk to your creditors and explain your financial hardship due to this pandemic. And seek some repayment assistance for your debts. If you have unsecured debts like credit cards to pay off, most likely, you need to make hefty payments every month! The reason is, the high-interest rates of credit cards.
In that case, find the best debt consolidation options to pay off your multiple debts by single monthly payments. And most likely, with lower interest rates! Thereby, you can repay your debts with ease and your monthly expenses for debt repayment will be less too!

 If possible, opt for a side hustle at the earliest! After all, doing a side hustle is always a good idea to make some more money! You can look for some jobs that allow you to work remotely, especially during this pandemic. Besides, I would suggest you find a side hustle that fulfills your passion. Thereby, you will stay motivated during this pandemic and earn some money as well!

So, the bottom line is that it can be a wise decision to tap into your emergency fund during the COVID-19 pandemic if you really need money like in the instances that we discussed above! But make sure, you don’t spend money randomly from your emergency fund! By doing so, you might run out of your funds during this critical period. Rather, try to maximize savings to build wealth effectively and work on attaining your financial goals!

Nicholas Green

Guest Post