Should I drain my emergency savings because of coronavirus?
First off, congratulations for having an emergency fund! Approximately 25% of Americans couldn’t cover an unexpected $400 bill, let alone a month of expenses. To answer the question of whether or not you should drain your emergency fund because of coronavirus, that all depends on your situation.
Do you need to drain your emergency fund? If you’ve lost your job or had a cut in your hours or salary, then using the money in your emergency fund is warranted. Whether you need to drain your account is another question.
When you have a loss of income, the first thing to do is to revise your budget, cutting out all of the extras. This includes eating out, getting coffee out, and entertainment. All the little extras. Your budget should consist only of necessities such as housing, utilities, car payment, insurance, gas, medicine, and food. Cover your basic survival needs so you have the ability to look for employment.
Next, evaluate all of your income. Think of new ways to come up with extra cash. This could include selling unwanted or unneeded items, babysitting for friends, and donating plasma. Once you’ve done this, determine how much you need to take out of savings to cover only the necessities.
The goal is to be as frugal as possible so that you only need to use some of your savings. This will help to stretch that fund out as long as possible. It’ll also give you time to survive until hopefully the tide turns, and you can get back to full employment.
Linda Jacob is a Certified Financial Planner® and an Accredited Financial Counselor®. Linda began working in the banking industry in high school and put herself through college. After years of growing assets for her clients, her true purpose in life became clear. She was put on earth to help everyone become successful money managers, get out of debt, and reach their financial goals. When Linda isn’t working, she enjoys cooking, golfing, and reading.