Here’s a question I get asked a lot: “When is it okay to use your emergency fund?”
And I usually respond with something vague and unhelpful like, “It depends.” But really, an emergency fund is just for that: an emergency, a life-or-death situation… or at least a serious, unforeseen event where cash would get you out of a serious jam.
Well, last week I went against all conventional personal finance wisdom: I dipped into my emergency fund to help pay off a portion of my student loans.
Why I Used My Emergency Fund to Pay Off My Debt
For me, I’ll never be comfortable with student loans. Debt makes me anxious and limits my opportunities in life. And that’s why I pledged to use all of my extra income toward paying off my student loans, regardless of other financial opportunities I’m missing out on.
But using my emergency fund to pay for my debt? Did I go too far and break my own rules?
I don’t think so. In fact, I consider my debt to be a financial emergency.
One of my favorite blogs, Mr. Money Mustache, puts it best: “Debt is not something you ‘work on’ … it’s a HUGE, FLAMING EMERGENCY!!!“
So I did what any sane person would do in a financial emergency: use my emergency fund. Granted, I only took out $600 from my emergency fund. Not a huge deal. But that $600 was the difference between paying off my debt by the end of the year or still having student loans in 2014.
To me, the decision was a no-brainer. But to a risk-averse, emergency-fund loving personal finance fiend, it might seem blasphemous.
What Would You Do?
How you choose to use your emergency fund largely depends on your definition of an emergency.
Maybe Mr. Money Moustache and I are the only ones who would use an emergency fund to pay off loans. But his reasoning resonates with me, and when he describes debt as a killer swarm of bees, it’s exactly how I feel when I look at my student loan bill:
“AAAAAUUUUUUGGGHHHH!!!! THERE IS A CLOUD OF KILLER BEES COVERING EVERY SQUARE INCH OF MY BODY AND STINGING ME CONSTANTLY!!!! I NEED TO STOP IT BEFORE I AM KILLED!!!” – Mr. Money Moustache.
I’m curious to know if you would do the same. Would you dip into your emergency fund if it meant you could payoff your debt faster?
Enter the Pay Off Debt iPad Mini Giveaway
Whether or not you decide to use your emergency fund to pay off your debt, it’s important to track your debt progress so you can stay on target. That’s why I’m excited to share this new debt management app with you … and give you all the chance to win an iPad Mini 🙂
My blogger buddy Jackie over at The Debt Myth just launched the Pay Off Debt App – the perfect, portable debt management system for anyone who’s in the process of paying off a credit card or student loans. And what better way to use the Pay Off Debt App than on a brand new iPad Mini?
You have tons of opportunities in the raffle below to win the grand prize. And anyone who’s a fan of The Empowered Dollar on Facebook gets an easy entry!
Good luck, and happy debt paying 🙂
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|2.14% - 7.99%1||Undergrad & Graduate||Visit Citizens|