Financial Emergency Fund
December 5, 2016
There are various kinds of savings to opt for and whenever one decides to save, it is with a particular intention in mind. Mostly, the plan is to use the funds to fulfill something in the future against a family budget and monthly expenses. This is what savings are all about but even with all the options available, individuals pay little or no attention to savings that are supposed to take care of emergencies.
The financial emergency fund implies that someone has some money set aside to take care of emergencies or what is commonly known as a rainy day. Whether you have a plan in place or not, it is definite that one day the rain is going to come beating down on you, and if you had not prepared for this, then it will be unfortunate.
It is recommended that one should have savings to cover between three to six months expenses in their emergency reserves. Even for the employed, this is important because in an unfortunate incident, one may get sacked and if they have some emergency fund in place, they could survive for some time.
As you prepare to set aside some emergency fund, you need to calculate all monthly expenses and base your savings on that. This will help you realize how much you need to save if you opt for the three months or six months plan. A quick look at each of this plans when you finally have the figure in mind can be alarming.
Individuals are forced to believe that this is a huge amount of money and that any of the two plans is too ambitious to achieve. This might be true but if you consider the amount of money you will need to save for retirement, then you get a complete change of mind because it is much more than three months or six months worth of savings.
From there, the next big question that many have on their minds is how they will be able to finance their emergency budget. You will be surprised to find that the answer to this question is within reach. Some off the ways to achieve this would be to cut down on the amount you send to your credit cards and put that cash in the emergency fund.
Other options are opting for a cheaper car as you shop for one, saving some money from your next bonus payment, reducing on your family budget on the time you go on vacation, dining out fewer times than you have been in the past, among other things. All these are things we do every other day yet we suggest that we have no money left to save.
You also need to assume that your emergency fund is a recurring expense that needs to be funded every other month to cultivate some discipline. Once you have the fund in place, do your best to protect it because it should only be used when an emergency crops up. There is no good day for an emergency to show up, so, the sooner you start saving, the better.