Besides death and taxes, Ben Franklin famously said that nothing else in life could be counted on. It's possible that Old Ben intended to include "emergencies" on that list. Unexpected events occur no matter how meticulously we prepare.
That's why it's crucial to set aside money in case of an unexpected expenditure; this emergency fund will help us pay our bills until we can get back on our feet. This article will discuss the importance of having a savings cushion and several good options.
Why Is It Essential To Have An Emergency Fund?
If you want a comfortable retirement or other comfortable financial life, you should prioritize building an emergency fund. Let's examine the effects of having an emergency fund on your life outside of money.
Reduces Tension
Having an emergency fund allows you to live a more carefree and comfortable life. Having a contingency strategy in place can put your mind at ease and ensure you are prepared for unforeseen circumstances.
You Won't Need To Apply For A Payday Loan
When money is tight, it might be embarrassing to ask for a loan or beg a friend for help. Not only would an emergency fund help you address the situation, but it will also help you keep your dignity intact.
Don't Use Future Savings
You have critical long-term objectives that are connected to your finances. Having a contingency fund set up can allow you to secure your aspirations while meeting your immediate financial obligations.
How Do I Get Started Saving for an Emergency Fund?
Set Your Monthly Budget
Consider your monthly budget carefully. Reduce your outgoings as much as possible and put the money you save into an emergency fund. Today's frivolous spending might eat away at tomorrow's emergency reserve.
Auto-Debit Emergency Fund
When you designate a certain amount of money each month to go into an emergency fund, you will be reassured about forgetting to put anything aside for those rainy days when you need it most.
Don't Use The Emergency Money For Minor Emergencies
Many people make the standard error of tapping into their emergency fund for easily manageable situations within their regular budget. It would help if you were critical of the current scenario and
Why Do I Need An Emergency Fund?
Having a savings account set up for unexpected expenses is something you know is crucial. However, it helps to know how valuable an emergency fund might be. Just consider these reasons why you should start saving immediately:
Lower Your Debt Burden
Without money, you'll have to turn to credit cards, payday loans, or even relatives and friends to cover any unforeseen costs. There is no need to pay interest on emergency money. In addition, you may decide when it is convenient for you to add to the fund.
Job Protection
An emergency fund allows you to pay for living expenses for a few months while you look for work. In addition, you might take your time making a decision rather than jumping at the first apparent financial chance.
Save Your Business
Similarly, every business owner would attest that profit margins are often quite slim. If your company suddenly shuts down, you can avoid financial ruin by drawing on your emergency fund.
Pay For Home Or Car
The typical American spent over $5,000 on home repairs in 2018. As any automobile or homeowner will attest, the costs associated with fixing breakdowns, replacing worn-out components, and keeping things running can add up quickly. Having a savings account set up for unexpected events is a great way to safeguard your property and means of transportation.
Tax Surprise
As tax time approaches, taxpayers may experience a variety of unexpected outcomes. Generally speaking, monetary obligations to the government are payable all at once. Having a savings cushion might help you avoid a visit from the IRS.
Why Liquidate Emergency Funds?
We can all agree that unexpected expenses require access to a stash of cash designated for just such a contingency. Never invest money set aside for emergencies in anything that requires a long-term commitment, as doing so would prevent access to those funds in a crisis.
One part of an emergency fund can be kept in a bank account, easily accessible by visiting an ATM. At the same time, the other can be invested in liquid mutual funds, which can be accessed similarly. Withdrawals from liquid mutual funds are typically processed within 24 hours.
