You probably have had an emergency at some point in your life.Be it an unexpected medical problem,car damage or even a loss of a job.Maybe you always loaned from licensed money lenders such as Easy Credit (Singapore) . Emergencies come unexpected and most of them need money to fund so as to maintain a balanced lifestyle. That’s where the emergency fund comes in. An emergency fund is money you set aside to cover the expenses of a financial surprise.You might lose your job but you had an emergency fund that covers three months expenses. That way you already know that you do not need to worry about how you’ll survive before getting another job.
WHY EVERYONE SHOULD HAVE AN EMERGENCY FUND
Having an emergency fund is not for just some people,it’s for everyone. Whether you earn $100000 or $1000 per month,you need an emergency fund. You can claim that you can borrow money form licensed money lenders but what if you already have and are deep in debt/Some people say ”I am only 20 years,do I need an emergency fund?”.Of course you do,even our parents would tell us to save for a ”rainy day” from when we were 10 years old.To clear your questions on why you should have an emergency fund, I will give you three major reasons;
1.Maintains the level of your financial goals
Some time back I didn’t have an emergency fund and I was broke due to my bad spending habits. My laptop needed repairs worth around $112 to even power on. You might be thinking,”that’s not a lot of money”. Well to me at that time,it was a lot of money.I had no support from family and and I was deep in debt not to forget that my blogging journey was just beginning. The situation was driving me crazy and I was in deep stress,just some inches away to giving up. How I came to walk away from that was a struggle of what seemed like decades. See,If I had an emergency fund I could have scooped some and paid for repairs to continue building my goals.
You cannot wake up everyday without an emergency fund wishing life to be smooth all through,no.Living that way is living with a dream you’ll never accomplish due to set backs.We do not know what to expect in life. We only have to build our goals,have a stash in case of emergencies so that they do not pull us back to startups. An emergency fund is one of the key factors of a personal finance foundation.
Can you picture how emergencies make you feel?They mainly stress a person who does not have an emergency fund prepared.If you lose your job,what will you do?Some of you have it figured out but some would even be stressed thinking about the situation.
An emergency fund will give you hope that even if you happen to stumble on some difficulties,you are covered.You won’t live on a financial edge and you would definitely have confidence that you can tackle anything life throws at you.
3.You Can Say No To Bad Financial Decisions
When you have a medical expense,you ran for your credit card.Why?That’s the only option you can think of right now.When you are in stress or anxious,your decisions are rushed.You can even start withdrawing from your retirement savings to tend to an emergency.Now that’s what we call a toxic financial decision.
Having an emergency fund,even that which covers an expense partially,makes you rethink your financial decisions.Taking leaps on your finances would be calculated because you know that this won’t be the final blow of life.The commitment to build an emergency fund gives you an understanding of your finances such that you would make the right financial decisions to maintain financial balance.
HOW DO I START AN EMERGENCY FUND
This is where it becomes a challenge. When starting to build an emergency fund, you do not have to pressure yourself to build a big stash at a go. You first have to weigh your income and lifestyle. Apart from worst case scenarios like cancer where the amount of the expense is almost the same whether you are poor or rich,there are possible emergencies to expect. What I am trying to say is do not focus on building an emergency fund worth $10000 in 6 months while you earn $1000 per month. That would be an unrealistic goal and it will be hard to attain. This might make you give up before you even get started. What is advisable is to build an emergency fund that fits you,one that can balance your financials.
How To Build An Emergency Fund That Suits Me
How do you know the amount of money you can stash over a certain period of time? How do you know it’s enough? To figure out how you can build an emergency fund first you need to ask yourself these questions;
1.How much do I earn(to the last coin)?
2.How are my expenses?Can I reduce them? Calculate and put down all your expenses and adjustments you need to make.
3.What are my possible regular emergencies? Are they car repairs,electronics repairs,what can I lose any minute from now?
4.What of worst case scenarios? What happeens is I fall ill? Would I be able to take care of the special care expenses?
5.How is the risk of me losing a job?Can I lose it anytime? Is my job quite permanent?
After you make this self assessment, it’s now time to process and and analyse remedies. If you are prone to losing your job then it’s high time you start building a big emergency fund to accommodate your survival. The regular emergencies are the ones to work towards most at first.You can calculate the possible emergency fund you need using the emergency fund calculator.
You can think that this whole idea of having an emergency is not a must.You think that you can save in one pool where you’ll be taking money to invest from while also withdraw in case of emergencies?. Well I’ll say go on do that but….I am going to give you a chance to rethink what you are going to do. Because as soon as you fetch from the mixture, they might not be savings anymore.You will start using the money in non emergency purposes. The reasons they have been given different names in the first place is to set boundaries. You can’t cross the line of a restricted area, but if everywhere is a free passage then you’ll go all the way.
An emergency fund gives you freedom to think forward. With the limitless distractions that life throws at us(emergencies),you know you can move forward. Without the emergency fund,on your way to financial freedom you have to stop and look into ways you can eliminate emergencies. This time you use to tend to emergencies is wasted opportunity. With a trend of being pulled behind by emergencies, you’ll take longer time or even never reach your financial goal. I think I have explained enough for you to feel motivated to start saving now.Your choice.