Financial planning: When should you use your emergency funds?
Starting an emergency fund is often emphasized, but generally not much is documented in the literature about when you should tap into that money. Let us discuss what you need to know about deciding when it is time to withdraw money from your emergency fund.
Job loss and income reduction Job loss is one of the biggest financial emergencies. Owing to the pandemic, there is a significant negative impact on industries across the spectrum. When you lose your job, you need to tap into your emergency fund to cover living expenses such as housing, food, etc. Sometimes, you may not lose the job, but might end up with reduction in working hours or a salary cut. In such a scenario, you may need to cover the gap by dipping into your emergency savings.
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