‘Tis the season to spend more than usual. Between hosting dinners, attending soirées, and buying gifts for all your loved ones, cash tends to disappear pretty quickly around this time of year. You may run out of it before you get through all your list of things to do.
If you have a decent-sized emergency fund tucked away, these savings may look awfully tempting right about now. They’re just sitting there, not being used, when you need some extra cash to make the spirit bright.
But transferring money out of this account for the festivities would break the biggest rule on the books. While savings are there to help you in a crunch, they aren’t meant to be a crutch for extra spending. Your emergency fund is for, well, emergencies.
Rule #1: Your Emergency Fund is Off Limits
Every holiday season, you can expect the same kind of spending to come your way: extra food, travel, decorations, and gifts. You can easily include these expenses in your budget so that you can make these extra purchases at the end of the year.
The only problem is that they aren’t the only kinds of expenses that can arrive in time for the holiday. Your kids can fall ill and need time off school, which leads to you taking off time from work and paying for prescription medication. Your furnace can give up the ghost just as the weather turns — next thing you know you have to pay for an HVAC specialist to come out during expensive off-hours.
These surprise medical expenses and repairs are next to impossible to predict, so it’s not like you can budget for them in advance. That’s why you have an emergency fund; it’s a catch-all savings account that can help in any unexpected situation.
What if Your Emergency Fund is Too Small for the Unexpected?
Your emergency fund can fall short, even if you don’t tap it for the holidays. It happens if you are just starting to save, and you haven’t managed to build up a balance yet. Or you may encounter an unexpected expense shortly on the heels of another unexpected expense, well before you can restock your savings.
While there’s no way of guaranteeing you’ll face these issues in the future, there’s a good chance the holidays will go sideways in someway, somehow. You can feel more prepared for these emergencies if you learn about the benefits of a line of credit as a financial safety net.
Having a line of credit can take some of the pressure off your finances. You can make quick and simple draws against your account any time you need some extra cash in an emergency, even if it’s on a stat holiday.
How Can You Avoid Using Your Savings This Holiday?
Your emergency fund is tempting because it is an easy solution to a tricky problem. Luckily, it’s not the only solution. Check out the tips below to reduce spending and avoid using your emergency fund:
- Budget out your spending limits and divvy it up between responsibilities.
- Use a list whenever you shop to avoid picking up splurges.
- Consider swapping out store-bought gifts for homemade items.
- Focus on what really matters this holiday — being around the people you love.
- Prioritize experiences and activities over expenses.
Talk to the people in your life about how you want to cut down this holiday. There’s no need to get into specifics about your budget — just let them know you want to curate a more mindful holiday experience. Who knows — you might start a trend!