Dave Ramsey Says to Ask Yourself These 3 Questions Before Using Your Emergency Fund

Here's how to separate the real emergencies from the inconveniences.

You can't plan ahead for everything. That's why preparing for the unexpected is a must, and that includes unexpected financial issues. One of the best ways to protect yourself from these is with an emergency fund. By setting some money aside for emergencies, you don't need to borrow money if your car breaks down, you get sick, or any other calamity strikes.

Personal finance advice often focuses on how to build your emergency fund, which makes sense. That's usually the hardest part. But it's also important to know when to tap into your emergency fund. You don't want to drain your emergency savings unnecessarily, and then be left unprepared if a real problem arises.

Finance personality Dave Ramsey shared three smart questions to go over before using your emergency fund. By asking yourself these questions, you'll figure out if an expense is emergency-fund-worthy, or if you should find another way to pay for it.

1. Is it unexpected?

An emergency fund is your protection against things you don't see coming. It's not for predictable expenses, as you should ideally be saving for these separately.

For example, a car accident is unexpected. If you need to pay for repairs after a car accident, then using your emergency fund for that makes sense. Car maintenance, on the other hand, isn't unexpected or an emergency. You know your car's going to need oil changes, a tune up, and replacement parts at certain intervals. Save for these ahead of time so you don't need to raid your emergency fund for them.

2. Is it absolutely necessary?

When you're debating using your emergency fund, think about whether the bill you need to pay is a want or a need. If it's not essential, then you shouldn't pay for it with your emergency savings.

It's usually not too difficult to separate wants from needs. If you lose your job, you'll need to pay for rent and food with your emergency fund. A new TV, a vacation, or a designer jacket all fall pretty firmly into the wants category.

The hard part is resisting the temptation to dip into emergency savings for things you want. That's why you need to be diligent about only using it for needs. And even with true emergency expenses, be careful not to spend more than necessary. For example, if your computer dies, it's reasonable to buy a new one with your emergency fund. But you shouldn't raid your emergency fund to get the most top-of-the-line machine, unless it's what you need for work.

3. Is it urgent?

Save your emergency fund for expenses that you need to pay ASAP. If it can wait, then make it a savings goal that you work towards.

Let's say your home is going to need a $5,000 repair. If a specialist tells you that you should do it right away, then it's clearly a good time to use your emergency fund. But if they say that the repair can wait until next year without causing any issues, then it's not exactly urgent. You may be better off planning to do the repair later and saving what you can every month until then.

There's nothing like the peace of mind that comes with having an emergency fund. And if you're facing down a real emergency, then you should use that money you've saved for this kind of situation. Just go through those questions that Ramsey recommends first to confirm that you're using your emergency fund for the right reasons.