Set Up An Emergency Fund

How To Set Up An Emergency Fund

Emergency Fund tricks

My number one goal is to help you and your family improve your financial goals so that your total life will be improved. You can smile better when your total life improves. That will make me happy knowing you have the freedom to live life to its fullness.

EMERGENCY FUND

In life, you need to plan towards emergencies. There are some emergencies you foresee coming, others just happen. Your son can take ill suddenly, you may decide to quit your job like me or suddenly, your car breaks down. If you have not set money aside to take care of such emergencies, you may end up in trouble.

An emergency fund is a cash fund set aside in savings account specifically to take care of those ‘just in case’ situations I have mentioned. Think of it as a buffer against whatever can go wrong.

BENEFITS OF KEEPING AN EMERGENCY FUND

1. It reduces financial stress

2. It helps you escape debt

HOW MUCH CASH DO YOU NEED FOR AN EMERGENCY FUND

This depends on your goals, lifestyle and current circumstances.

If you are single and receiving a steady income, you can save at least $1,000 to $2,000. Ideally, 3 months worth of your basic living expenses.

On the other hand, if you have dependents and self-employed, you will want to aim for more savings; $3,000 to $5,000. This must translate into 6 months of your basic living expenses.


WHERE DO YOU KEEP THIS CASH

The point is to have cash available whenever you want it. Keep it in a separate bank from where you keep your usual savings account. That way you are not tempted to touch it.

Put it in a high yield savings account where you can easily take it out upon request.

JUSTIFIABLE SITUATIONS FOR TAKING EMERGENCY CASH OUT OF YOUR SAVINGS

1. You get sick and need an operation to survive or live

2. A family member passes and you need to travel to be with your family

3. You get laid off work

4. Your car breaks down and you need it to get to work

Situations differ. If your car breaks down and you can pick a bus to work, it is not an emergency situation. Others may not be able to pick the bus, it becomes an emergency.

THESE DO NOT QUALIFY FOR TAKING MONEY OUT OF YOUR EMERGENCY FUND

1. Expenses you can plan for (Insurance, new tires for your car)

2. Gifts for birthdays, holidays and other special occasions

3. Spontaneous purchases and trips

I hope this article benefits you tremendously.

Similar Posts

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.