What is financial emergency fund and have you ever calculated how much do you need to save for future use?
The whole world is going through this sudden pandemic and we all have realized the importance of saving emergency funds.
An emergency fund is a valuable asset that should be set aside in case of a financial emergency. It is a fund that you may use in a time of crisis or for unanticipated and unplanned events, rather than for regular expenses. As a result, you must tailor it to meet any unexpected financial shortfalls that might arise.
Nobody wants to waste time worrying about the worst-case scenarios like we are already facing from last one year. However, if an emergency occurs and you are not financially prepared, the consequences can not only extremely traumatic, but also financially disastrous. It is the most crucial justification for having a financial emergency fund.
1) Trying to pay off Debt
It can help you stop financial bump in the road. And you can use it to handle your stressful events smoothly. If you properly plan to have sufficient emergency fund, you may want to concentrate on quickly reducing debt. An important aspect of creating a budget is prioritizing your priority expenditures first, so that you can free up funds to put into a debt reduction plan while also contributing to a Financial emergency fund.
2) You are only source of income
At least you should have a year’s worth of expense ready in hand. Try to save if you are single handed source of income for your family, having a large emergency fund is critical. This will assist you in coping up with a job loss or illness that prevents the primary breadwinner from functioning.
3) You own your house
It can help you handle the cost of maintenance and will be bit less stressful. Be sure that you plan for taxes in your budget as well . Just imagine, one fine evening you are relaxing on your comfortable Couch and enjoying your favorite cuisine and suddenly one toilet started overflowing. It not only destroy your evening plans, but it could also can ruin the planning of your monthly budget , as plumbing emergencies aren’t cheap. Another explanation why you should have a Financial emergency fund.
4) You stay away from family or in other country
It can be over priced to travel home. So it is always advisable to save your funds for emergency . Cost of airlines ticket can go high anytime at last moment you won’t have choice. It is advisable to always park your savings for emergency visits as last moment emergency is unexpected and chances are you might not even get help from friends/ relatives.
5) If anyone in family having medical issues
Last but not the least. One of the main reasons for having an emergency fund is that you don’t end up with large medical bills and no way to pay for them, whether it’s due to sudden illnesses or cavities or major injuries, a well funded emergency fund can help you deal with it. And plan it in a way to make it easier to come out of the challenging times. Try to save your money to cover a medical emergency rather than taking care of yourself if you’re looking for excuses that you require a Financial emergency fund. You will focus on getting better when you aren’t thinking about the cost of your medical care.