What To Do When Your Emergency Fund Runs Out

Emergency Savings May Only Go So Far in a Crisis

Hispanic couple having difficulty paying bills online

Jose Luis Pelaez Inc. / Getty Images


Emergency funds are designed to be a financial lifeline when the unexpected happens. But what happens when the unexpected doesn’t let up?

Nearly 14% of Americans say they wiped out their emergency savings as a result of the coronavirus pandemic, according to a survey conducted by CNBC and the fintech investing platform Acorns. If your emergency savings are running low because of an extended drop in income, pandemic-related or otherwise, you may be wondering what to do next.

Evaluate What You Have

The first step in managing a cash crunch is knowing what resources you have to work with and what expenses are reducing those. Even if it's unpleasant, review your entire financial picture, including:

  • How much is remaining in emergency savings
  • How much in income you're earning, if any
  • Your current budget and expenses
  • Available credit you can draw on
  • Assets you can sell, borrow against, or rent out

When you're in a financial emergency, having options is essential. A clear view of your financial picture allows you to identify options that can help you adapt and survive in your new circumstances.


Steer clear of high-interest borrowing options, such as payday loans or no-credit-check installment loans, as these can charge effective APRs in the triple-digit range.

Streamline Your Spending

You’re likely already cutting costs by shopping smarter for groceries, stopping automatic contributions to retirement and savings accounts, and eliminating or reducing paid monthly services (cable, satellite radio, gym membership). Some additional cost-cutting measures include:

  • Increasing deductibles for insurance coverages to reduce premiums
  • Reducing your tax withholding at work
  • Negotiating new plans for cell phone service and internet
  • A 0% balance transfer (be aware of the balance transfer fee)


If you're considering using a bill negotiation service, check the fees to make sure any potential savings you get are justified by the cost.

Reach Out to Creditors

Options are available through your lenders and creditors to help manage your debt. Some possibilities worth exploring include:

  • Deferment or forbearance of student loans, including coronavirus student loan relief options
  • Mortgage forbearance or loan restructuring, including coronavirus mortgage relief options
  • Skip-a-payment programs for auto loans
  • Credit card hardship deferment programs

Coronavirus-Related Relief

Some measures are applied automatically. For example, the CARES Act temporarily suspended payments on federal student loans through Sept. 30, 2020, and interest rates were reduced to 0% for eligible borrowers. President Joe Biden extended the forbearance period until Aug. 31, 2022.

These same student loan waivers were extended to defaulted privately held Federal Family Education Loans (FFEL) until Aug. 31, 2022. Any loan payments made retroactive to March 13, 2020, will be returned to the loan holder.

The CARES Act also included provisions for homeowners who need to stop making mortgage payments. If you had an eligible mortgage loan, you could request a forbearance for up to 18 months during which no payment would be due. And foreclosure actions on federally backed loans were delayed through July 31, 2021, including loans backed by Fannie Mae and Freddie Mac.

You may have additional protections if you live in a multifamily property with financing backed by Fannie Mae or Freddie Mac. If the property owner takes a forbearance, they can't evict you during that time. They also must notify you if that's the case. They also can't charge late fees or penalties for nonpayment of rent and they must give you some flexibility with paying any back rent.


While no longer in force, if you rent, the CDC had imposed a ban on evictions for eligible individuals due to COVID-19 through Oct. 3, 2021. To have used this protection, you and each adult listed on the lease would have needed to complete a form attesting to the details of your financial situation and submit it to your landlord.

Hardship and Deferment Options

When reaching out to creditors, be candid about your financial situation, says Adem Selita, CEO and co-founder of The Debt Relief Company. "The better you explain your hardship, the better your odds of receiving more relief on your obligations."

If a creditor offers a hardship option, make sure you understand the terms and get it in writing. Deferring mortgage payments, for example, can provide short-term relief but could mean trouble later if the terms require a large balloon payment to cover the deferred payments.


Before enrolling in a hardship program, ask how it will be reported to the credit bureaus. Ideally, the lender or creditor will report your account as current as long as you adhere to the program guidelines.

Consider Tapping Your Assets 

Extreme circumstances sometimes call for extreme measures. Look at your list of resources. Can you monetize any of them?

Your Home

For instance, if you own a home and have extra space, you may be able to rent it out for storage or tenancy. While renting space may be a viable option for some, consider other options if it poses a safety threat to you or your family.


Review zoning ordinances in your city to make sure any rental arrangement you’re considering (especially if it's short-term) is legal.

Selling your home to access tied-up equity is another possibility, particularly if you have an oversized mortgage payment or can no longer make mortgage payments.

Remember, your home is an investment, the price of which is subject to appreciation and depreciation based on the overall real estate market. If real estate values have appreciated significantly in your area, realizing those gains by selling your investment could be prudent.

Retirement Accounts

If you have a 401(k) or individual retirement account (IRA), tapping those assets may be an option, but only as a last resort and perhaps not even then. The CARES Act made it possible to withdraw up to $100,000 from a 401(k) or IRA through Dec. 30, 2020, without triggering the 10% early withdrawal penalty.

But depleting your retirement accounts can have significant negative consequences for your long-term financial health. When you withdraw retirement funds early, you miss out on compound interest. Even if you put the money back later, you may not have sufficient time to make up for the lost growth.


If your situation is particularly dire, consider that retirement accounts are generally protected during bankruptcy proceedings.

Look for Financial Assistance

Depending on your situation, you may qualify for help with energy bills, phone bills, cash assistance, and housing assistance. Programs worth exploring include:

  • Medicaid
  • Supplemental Nutrition Assistance Benefits (SNAP)
  • Women, Infants, and Children (WIC)
  • Temporary Assistance for Needy Families (TANF)
  • Low Income Home Energy Assistance Program (LIHEAP)
  • Housing Choice Voucher Program (Section 8)

Kari Lorz, personal finance expert and founder of Money for the Mamas, recommends checking with your employer and your employee benefits package to see if assistance is available, such as hardship grants and service plan discounts.

Most importantly, don't panic if your savings are running low. "If you have an emergency and no emergency fund, the first thing to do is to breathe," Lorz says. "You will find a way, it just may take some digging."

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. CNBC. "Nearly 14% of Americans Have Wiped Out Their Emergency Savings During the Pandemic: CNBC + Acorns Survey."

  2. Congress.gov. "CARES Act," Page 134 STAT. 404.

  3. The White House. “Statement by President Biden Extending the Pause on Student Loan Repayment Through August 31st, 2022.

  4. Federal Student Aid. "COVID-19 Loan Payment Pause and 0% Interest."

  5. Consumer Financial Protection Bureau. "Learn About Forbearance."

  6. FHFA. "FHFA Extends COVID-19 Foreclosure and REO Eviction Moratoriums."

  7. U.S. Department of Housing and Urban Development. "Mortgagee Letter 2021-15," Page 1.

  8. Federal Housing Finance Agency. "FHFA Extends COVID-19 Multifamily Forbearance Through September 30, 2021."

  9. Centers for Disease Control and Prevention. "CDC Issues Eviction Moratorium Order in Areas of Substantial and High Transmission."

  10. Internal Revenue Service. "Coronavirus-Related Relief for Retirement Plans and IRAs Questions and Answers."

  11. Congress.gov. "S.256 - Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," Pages 119 STAT. 62-65.

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