Jesse lays out a strategy for managing unknown expenses without continually dipping into your emergency fund. Traditional budgeting advice tells you to create an emergency fund for dealing with unforeseen expenses, but often people end up using their emergency funds for irregular, but foreseeable expenses -- things like new tires, new cars, A/C repair, etc. They don't happen regularly, maybe only every several years, but if you look into the future you know they are coming.

 

For YNAB'ers that are following Rule #2, Embracing Your True Expenses, these aren't true emergencies, and they are already covered in the budget. In the rare event of a true emergency that catches you off guard, Jesse recommends that rather than spending money out of your global emergency fund, set up a new category for that expense. Maybe it's a house repair that you had never encountered before. Make a new category for that type of repair, and start a new sinking fund for it like you do for other Rule #2 expenses.

 

Over time, this strategy will give you useful data about your true expenses, so that you can be more prepared for next time.

 

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