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Retirement Planning

Stealing from Your Emergency Fund

I have a confession: I break the most basic, cardinal rule of the Emergency Fund about once a month. I steal money from my emergency fund for something that many would not consider a true “emergency”, to help balance out my cashflow.

It’s not that I’m in the red at the end of each month. On the contrary, I usually end up in the green by at least a few dollars, but I do have an imbalance in my cashflow the first part of the month.

For my full-time job, I get paid on the 1st and 15th rather than every 2 weeks, but more than half my bills are due in the first half of the month. This can really make things tight, and sometimes even negative, until my second check gets deposited on the 15th.

So, to prevent myself from over-drafting my checking account and having to pay horrible, haunt-you-in-your-sleep overdraft fees, I “borrow” some money from my EF to cover my cashflow shortage until my second check comes in. Then, promptly following the 15th, I transfer the same amount that I borrowed back into my EF.

Ok, ok! I know, I’m a bad PF blogger. I know, EFs are only to be used for real emergencies, blah, blah, blah.

{Obviously I liked the Olsen twins when I was growing up 🙂 }

But is “borrowing” from my EF truly a problem? I’m not actually stealing from myself as the title suggests because I always pay myself back in full before the end of the month. Plus, my borrowed amount is getting smaller each month, meaning I am making progress at getting my cashflow to work out properly.

In order to get my cashflow to balance out more evenly, I’ve changed payment due dates on a few of my bills. Plus as I get more and more debts paid off, I’ll have fewer payments to make each month, which will also help since I’ll have more money leftover to make the “extra” payments at the end of the month. (I always pay just the minimums on their due date and then put the “extra” money toward the debts at the end of the month, much like Ashley from BAD.)

In the end, borrowing from my emergency fund is something that is saving me some money in the here and now, in the form of avoiding overdraft fees, but it is not something I’d like to continue doing in the long run. Eventually, I’d like to build up a small buffer in my checking account, or open an additional savings account, so I don’t have to keep borrowing from my EF for something that isn’t a true life-or-death emergency. Afterall, I will be in big trouble if a true emergency pops up and I have no EF, or not enough of one, since I borrowed from it to cover my monthly bills!

What do you think about borrowing money from your EF for something that isn’t a true emergency?

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Erin Thompson

Erin Thompson spent years managing her own blog about budgeting and debt. Because of that, she has great insights not only about managing spending and borrowing but also about running websites profitably. When she's not writing articles for us, she's traveling and looking for new types of wines to try.
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