In the personal finance space, we don’t talk about the fear and anxiety of pulling your emergency fund. But we constantly talk about saving up an emergency fund. From what they are, to how much you need and where to save them. As someone who has dealt with multiple back-to-back emergencies. I’ve consistently caught myself pulling away from wanting to use my savings during difficult times. But, why is that?
The Emotions of Savings
Emotions are a big part of the money that we’re constantly told to ignore as if that would make the feelings go away. Instead, I choose to embrace that our financial choices are tied to a vast array of emotions. Once I’ve accepted this, I saw the mindset shift that I needed to make in order to start winning with money. This is why I am a firm believer in saving with purpose. Because regardless if we like it or not our emotions play a large part in our finances. So we might as well learn how emotions can affect how we save.
Most of the time when we’re saving money it’s either for something fun like a vacation or something needed like an emergency fund. These two goals have two very different emotions tied to them. Hence, affects how we save for them. When you’re saving for something fun, you’re getting a big hit of dopamine every time you save up and spend money. But on the other hand, we get a rush of anxiety when we have to save and spend on an emergency. This emotional difference can lead us to prioritize gratification over necessity. Ignoring the foundational need to save for a rainy day, solely based on the built-up anxiety that it makes you feel.
Financial Comfort Zone
Your financial comfort zones is another touchy topic when talking about savings. Listen, once you’ve saved some money up, we become accustomed to having those savings. We work so hard to build a safety net, that to imagine it being gone is too uncomfortable. You start to literally feel like if you don’t have a 3-month emergency fund at all times then you’ve failed. For me, it got to the point where my husband and I questioned if our hardship was even emergency fund “worthy”.
This mindset of not touching your emergency fund is a harmful comfort zone. Because you’re starting to lose touch with what your emergency fund is for. Hence, underestimating what the true value of money is. The whole purpose of an emergency fund is to help us solve financial problems during difficult times. Not using your savings because you’re so used to having savings, could leave you pulling money you need to cover bills or leave you in debt.
Having Financial Options
There were a few financial principles that grounded me and helped me push past the anxiety of pulling my savings. I had to ask myself a series of questions to find out what my financial options were. Like, what other financial resources do I have if I don’t use my emergency fund? If I use my credit card, I now have to pay off a debt that will compound and grow at a high-interest rate. Making it dreadful to pay off if you’re already in debt.
Another option is pulling money from my investments. This would be painful if the market is down, like how it is now. Plus I would have to deal with extra tax paperwork of capital gains or losses. Or I have the option of pulling money from my bills, which is an automatic no for me. The only other option is if you have enough discretionary income to cover the emergency. But, this isn’t a great option for most since 54% of Americans say they live paycheck-to-paycheck.
Closing Thoughts
The best option is to be realistic with your financial options. Just doing this one step can help you better decide on how you want to financially cover an emergency. For many, it can be a mix of savings, discretionary income, or even help from family. Regardless of your situation, having financial options is better than none. As someone who freezes every time I have to deal with an emergency. Please give yourself some grace and embrace the blessing of focusing on your emergency without worrying about the money. You worked hard for that moment, take it, you saved up for it.
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- Emergency Fund: What is it and how much do I need?
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