Your financial security could be messed up when you do not plan for emergency situations in advance. Life can be quite unpredictable and how you expect it to turn out maybe totally different from how it turns out to be. A health problem, fire, job loss or accidents are unpredictable and can happen to anyone. To avoid the frustration that may come from spending during such occasions, it’s important that you have an emergency fund set up.
How Much Money should you Set Aside for Emergencies
This is a common question when financial experts talk about emergency funds. People want to know how much they can set aside whether it is for medical emergencies or they have lost their job. Some of the factors that may determine how much you set aside are your monthly expenses and also how much you earn. At least, keep aside an emergency fund that can support you for 6 months even when you no longer have an income.
What you should Avoid Doing
When you get an emergency especially when you have lost a job, you should never use a credit card to fund your emergency. You will just sink in debt and this is a sure way to have worse financial situations. Credit cards are costly considering that by taking advance credit, you will not only be paying back the money, but you will also add interest. There would be no point in doing this when you have a chance to keep some money aside for emergencies.
What to do
Once you have decided that you will be contributing some certain amount to your emergency fund, the other thing to do is ensure that you can access that money when needed. For example, there are some situations that cannot wait. You do not have a job and you get a medical emergency! There is no time to wait and since this is the case, the emergency fund should be easily accessible.
Since no one knows when an emergency can happen, it is important that you be prepared for it. You may never be prepared enough, but you can do your best to contribute towards it. It will save you a lot of hassle and stress when that time comes. All you need is to sit down, consider your income, monthly expenses and how much you will afford to contribute.