Dave Says: Using Your Emergency Fund

Dear Dave,

My wife and I are working the Baby Steps, and we have our budget in place. Sometimes the budget gets busted because of home improvements and various other things. I think we should take money from our emergency fund when this happens, but she says it should come out of our restaurant and fun money. What do you think?

Joshua

Dear Joshua,

I hate to break this to you, but overspending is not an emergency. So, I'm siding with your wife on this one. If you budget a set amount in one category and you go over that amount, you've got to have something you reduce or cut out completely to stay within your budget for the month.

You'd be surprised at what some people call an "emergency." But here's the deal: If something happens on a pretty regular basis, it's a predictable event. That means you need to budget a larger amount for home improvements or whatever the problem area may be.

Overall, on a month-to-month basis, if you find you have $200 budgeted for car repairs and the repair turns out to be $250, I'd rather you cut back on eating out to make up the difference. That's the way my wife and I did it back in the day. We never touched the emergency fund for anything except big, unexpected, scary stuff.

—Dave