What to Do When an Emergency Fund Runs Out

Furloughs of U.S. workers during the 2007-2009 Great Recession and, most recently, during the federal government shutdown of 2018-2019 have highlighted the financial stress that many families face when their household income is cut off. Ideally, an emergency fund should be available to tide families over, but less than half of U.S. households have the recommended three to six months of expenses saved. Only 29% of households have 6+ months expenses set aside while 23% have no emergency savings, 22% have fewer than 3 months expenses, and 18% have 3 to 5 months expenses saved.

It’s fair to say that many household emergency funds won’t last very long. Then what? Ideally, people who have lost income have already cut back on discretionary spending and are living on less. Then what? Further spending cuts may be needed.

Then what? What happens next when a family’s emergency fund is completely gone?


Below are some other steps to consider to pay for living costs, depending on the specifics of the situation.

  • Develop a Side Hustle– Seek ways to earn freelance income during a period of no income or reduced income from an employer. Inventory your skill set and think about ways to convert your skills into an income stream.
     
  • Enlist the Aid of a Spouse– Determine if it would pay (considering child care and transportation costs) for an at-home spouse to enter the labor force and earn an income.
     
  • Borrow Money, If Necessary– During widespread income disruptions, such as a recession or government shutdown, some financial institutions may offer low-interest loan concessions. Other low-interest places to consider borrowing from are cash value life insurance policies, tax-deferred retirement savings plans, and/or close family members.
     
  • Take Advantage of Public Assistance Programs– Call 211 or visit www.211.org to find out about human services programs in your community and if you qualify. Examples include SNAP, energy assistance, and food pantries.

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