I always knew that having an Emergency Fund was important. I’m one who always likes to be prepared for anything that comes my way. I know for some, it’s hard to start an emergency fund when you barely have enough to get through the month as it is. But…every dollar counts. There’s no better time to start that fund than right NOW!
Why start saving?
There are many reasons as to why you should start saving up. The first and the main reason is for emergencies and security purposes. In case of unfortunate times, you or family could have some amount to fall back on– the financial situation could be taken care of, in the near future at least. This could also provide you with peace of mind, knowing that you and your family do not have to struggle–if things take a turn
Another reason is to plan your goals. Just like everyone else, you would also have multiple goals that you want to achieve in life. Either the aim is to buy a luxury car or build a beautiful home. In order to make these ‘dreams’ come true, you would have to save up.
Say you want a new home for your family and have been mentally prepared to take the step. Planning and funding are just the beginning of it all. You might have to figure out the layout of the house (which you might be able to find at sites like The House Plan Shop and similar others on the internet), the color, the theme or the aesthetic, and the furniture or the decor you want to put in it.
All these require you to be ready to spend a lot. Nonetheless, if you plan to purchase an already-built apartment (if interested, check out this Real Estate Blog for recommendations), you will still need to save a considerable amount of money. Even if you bought a new house, you would still have a few miscellaneous expenses, such as hiring a moving company, setting up your cable, etc.!
But, you do not have to ponder over these as there is always a solution. Let’s take the example of renting the services of packers & movers. In this case, you could look around your location or search on the internet to find the best ones. For instance, if you are located in and around NYC and would like to hire a moving company in new york, then you should consider taking a look at EQ moving. They have been known to be in this field for over 20 years. They appear to be providing affordable packages, so that you can save while shifting to a new place.
That being said, the above are some of the reasons why you would want to save up. A plus point about it is that to achieve your goals, just in case of shortage in funds, you wouldn’t have to take out a big loan. By setting a certain amount aside either weekly or monthly, you can ensure you have the opportunity to lead a stress-free life.
How to Start Saving
Take out ANY amount from your next pay check and add it to your emergency fund. If you’re just starting out, you can either save your money in a bank account, or in a safe at home. Of course, it’s probably safer in the bank. You want the money to be easily accessible, in case you need to get to it quick, so something like a CD wouldn’t be appropriate for an emergency fund.
Whether you can set aside $5, $20, $100, or more each pay check, the important thing is that you are starting to save. ANY amount will make a difference, and it does add up.
You can also take your CASH earnings from various online sources and use some of that towards your emergency fund.
How much should I have in my Emergency Fund?
It’s best to have at least 3 months of living expenses in your fund. In order to find out your living expenses write down all of your monthly bills. Add in what it costs for food as well as entertainment, gas for your car, and any other expenses. Once you come up with that number, times it by three. This number should be the goal you set for your emergency fund.
example:
Electric- $75
Mortgage- $1500
Cell Phones- $100
Gas- $500
Food- $500
Preschool – $500
Total: 3,175 X 3 months + 9,525
A family with these expenses should shoot for an emergency fund of at least $9,525. With that saved, in an emergency, they wouldn’t have to worry about bills for at least 3 months.
You just never know when an emergency will occur. Back in 2010, I went into pre-term labor with my youngest. The island I live on doesn’t have adequate facilities to care for a pre-term baby, therefore, I was sent to the island of Oahu. My husband took some time off from work to be by my side. We were there for a month, and during that whole month, we had absolutely NO income. My husband did not have paid leave from his job, so we had to make do with nothing more than the money we had saved. It was hard, but it was manageable thanks to the small “emergency fund” we had.
An emergency fund is not only for a time when you are out of work. It can also be used for certain emergencies that pop up. If you have a car accident, for example, there would be significant expenses afterward. Not just for repairs, but if you have a compensation claim for lost wages due to the accident, then there would be legal costs involved as well. You might get them back when you are awarded damages, but that could only happen if you have a really good personal injury lawyer. But until then, you have to spend out of pocket, and that’s where an emergency fund helps. Similarly, whether your car breaks down or you have a medical emergency, you just never know when your emergency fund could save the day.
It’s important that you only use your emergency fund for EMERGENCIES. I can’t stress this enough. Do NOT use your emergency fund for a shopping spree or a family vacation. You’ll need another fund for those. You can make a separate Travel Fund to save up for your next family trip and another fund for wants. I’d recommend building up your emergency fund first, but everyone deserves a little fun. So, if you have a good portion of your emergency fund saved up, it’s ok to put a little into savings for something fun.
Fun and games aside, I’d recommend building up your emergency fund first, but everyone deserves a little fun. So if you have a good portion of your emergency fund saved up, it’s okay to put a little into savings for something fun.
Do you have an Emergency Fund? If not, do you plan on starting one?
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