A comfortable “rainy day” fund is a key component to most personal financial plans. The experts don’t agree on the exact amount to keep in an emergency fund — advice ranges from three to twelve months’ of expenses — but they do agree everyone should have one. An emergency fund is self-insurance: It’s a way to cope with the unexpected without resorting to debt or other expensive options.

But what happens after you use your emergency savings? That’s what Sarah wants to know. She writes:

Over the last few months, we have been hit with several large, unexpected bills (large car repair, change in our county’s taxes, those sorts of things) which put a dent in our savings account.

We live a debt-free lifestyle — no mortgage, no car payments, no credit card debt or student loans — and this has freed us up to have one stay-at-home parent and one working spouse with a very moderate income. This low-debt/low-cashflow situation means we live fairly modestly, but also that we don’t have a lot of extra money to save. At the rate we save, it could take almost two years to replenish the money spent on these recent bills.

My question is: What do you do when your emergency fund has been used for its intended purpose? Do you just keep saving at your normal rate and assume things will catch up eventually, or would you try and ratchet up your savings to catch up quicker? Saving at a faster rate would mean we’d really have to cut back on most or all of our fun things or splurges, which might be hard to sustain for very long, but not catching up makes me anxious.

I suppose my second question is: Is it normal or even healthy to feel anxious after using one’s emergency fund? Or should I rethink my attitude and accept that situations like this are exactly what savings are for?

I think it is normal to feel anxious after depleting an emergency fund. Since building one of my own, I haven’t had to deal with not having one. I can’t say what it’s like to have it go away. But Kris has always been a saver, and I’ve seen how anxious she becomes when she has to use her savings. (She once had to bail me out when my car was totaled. That made her nervous for years until she was able to rebuild her savings.)

At the same time, it’s important to maintain perspective and balance. Sarah and her husband have made smart choices in the past. There’s no evidence that they’ve lapsed into any bad habits, so a certain amount of even-headedness is required here.

But how should they go about rebuilding their emergency fund? If they want to rebuild their emergency fund in less than two years — which is probably wise — then some temporary “juice” may be needed:

  • Cut back on normal indulgences. Using myself as example, if my emergency fund were depleted, I might need to cut my comic-book budget from $50 a month to $25 a month. I might need to eat out one night a week instead of two.
  • Take a temporary part-time job. I don’t say this often enough: I believe the best way to build savings (or to pay off debt) is to increase your income. In Sarah’s family, the stay-at-home spouse might take a weekend job for a few months. Or the working spouse might ask for overtime.
  • Sell some Stuff. When I need a quick cash infusion, I look around to see what I can sell on eBay or Craigslist. That’s more difficult nowadays (because I’ve already sold much of my Stuff), and it may not be applicable to Sarah’s circumstances. But it’s probably an option for many folks.

In many ways, these are the same tactics one might use to get out of debt — just on a smaller scale. To repay debt, you might have to cut back most of your splurges for several years. Here I’m suggesting cutting back on some of the splurges for a few months. Essentially, I think Sarah’s family should boost their cash flow for a short period of time. If they do this, they should be able to rebuild their emergency fund in much less than two years.

Have you ever tapped your emergency fund? How did it make you feel? What did you do to restore it? Do you have any advice for Sarah and her husband as they rebuild their savings?

Photo by Indenture.