First of all don't worry things are fine here at the TOR household. No need to raid the emergency fund, in fact we will add to it this week on pay day. I have just been thinking.....
Under what conditions should you raid the emergency fund?
1. If you are married, domestically partnered, living in sin, coupled up or really in any other situation where you share money with another person only get into that account with both people being involved. This isn't the way to cover up (not that you should be covering up anything but that is not the point) that you spent a bit too much on naked dancing girls, designer shoes, poker night, handbags or whatever. Obviously things are really bad (not borrow a few bucks from a friend bad but ski mask and handgun kind of bad) or you would not be wanting to raid the emergency fund. Do you really want things to be that bad AND have an incredibly pissed off spouse? I certainly wouldn't. Sit down and have a serious conversation about what is going on and what the two of you are going to do to get through it. Make this decision together.
2. What are you going to raid the emergency fund for? First of all if married, etc all read above again. Second this is personal and you might have a different answer than I. To me it is for covering sudden unavoidable expenses (think broke down car or sudden plane ticket home to bury a close relative, not a deal on a .308 or a boat or a diamond ring), job loss or something else completely lame and unexpected like a house fire or needing to flee a natural disaster and spend a month in a motel in Nebraska. I think it is good to keep it open because you don't know what sort of crappy thing is going to happen to you but the odds are over any given decade at least one probably will.
To what end will you use these funds is the more unique thought I have been mulling over.
One of my low probability (lower than being mugged but higher than say a lightning strike) concerns is something getting completely fucked at work. My job is very stable, like prostitution and gambling stable. As long as our Federal Government exists in anything near its current state my industry will be safe. For the foreseeable future given our current world circumstances (two conflicts, various threats on the horizon) we will probably be a growth industry. Given said current circumstances there isn't really much of a worry about job stability because people are leaving left and right, if you stay in you will move up.
However just because things are pretty stable doesn't mean they are 100% guaranteed and reliable for every person. Anything can happen in life (everything is just fine at work don't worry) like sometimes a boss gets a serious case of the ass at someone and crushes them in evals or a subordinate does something stupid and they crucify the first officer and NCO in line so I have thought about it a little bit.
I make pretty good money but it is our only income. [Wifey is looking like crazy and hopefully will find a job that will make her happy soon.] Also there are not a whole lot of places where my current skill set would be valued without a real change in scenery and job conditions. It isn't exactly like I am a plant manager in a town with 8 plants.
Odds are we would get home and spend a couple months with relatives but it could be awhile before we were back to around our current income. Lets say that before we got back to meaningful work things came to a head at the relatives place (doubt it would but lets say it did). Right now we have more than enough to buy a piece of junkish land in the general area we want to settle plus get some sort of a functional shelter (travel trailer, mobile home, etc) to put on it sitting in the bank. We could live all Dakin like on around minimum wage for a long time in this sort of situation. Heck we could do this on what I would get in unemployment.
The reason we (might potentially ) choose to take this extreme course instead of just getting an apartment or whatever then looking for jobs is that we would not know when real jobs could be had and the odds are it would be awhile. In two years time things would be fine but there would probably be a rough 6-9 months before then. There would be a high probability that things would come to head in terms of finances (if we kept more or less our current budget) before jobs could be had so we would need to drastically change expenses to survive.
Some folks say to have a 6 month emergency fund, some say 12 months or maybe even 18. Heck why don't you just have a 96 month security fund as well as 400 ounces of gold, $100,000 face in 90% silver, a dozen M1a's and a 12,000 acre retreat! The simple answer is that we live in a world of unlimited desires and limited resources. Most folks need to scrimp and save and sacrifice just to bank a little bit each month and keep it there till it adds up to much of anything.
Also money that is sitting in an FDIC insured account (or a safe) is money that can not be put towards anything else. To me as a relatively young person the idea of saving up 12-18 months wages before starting to save for a home down payment doesn't make a lot of sense. I would rather have less in the bank (say 4 months) and be paying myself instead of some other guy.
My point is that it might not be bad to have a contingency plan for radical long term or even permenant changes in income. You might (depending on your funding,age, levels of risk, etc) not even need to do anything toward putting this plan in motion unless your personal circumstances really change but it is probably wise to think this one out for awhile and discuss it with the spouse.