Dealing with the money you receive and speding it with no regrets can be quite stressful. This is in normal day-to-day life. If there is an emergency popping up unexpectedly, then you will have to spend whatever the amount required especially if you don’t have an emergency fund stashed somewhere. Whilst emergencies are just that, you don’t know when they come up, you can in a way be prepared for it. The best way to get ready for emergencies- especially of financial nature- is to have an “emergency fund”. Via building up a savings account, you are now ready to take up the world. You now don’t have to turn to loans from friends and family, credit cards or any other options to borrow what you want which will generate stress unnecessarily.
What is an emergency fund?
It is true that just having an emergency fund doesn’t mean all your problems hitherto are solved. However, it is of use when it comes to various situations. So what is an emergency fund? One thing you must remember is that am emergency fund is not for making big purchases such as a new car, house or for spending for your kid’s college fees. This also means that it does not have to be a large fund to be able to use for such requirements as above. It has to start small, you can perhaps set aside a few hundred dollars for a month when you receive the paycheck.
What to use it for
While a sudden, small cost can be covered by a payday loan, when situation such as losing your job suddenly or having to face an emergency surgery like thing comes up, you will face difficulties in finding the money. Major planned purchases are not to be funded by this. Also, the total is not set at a certain amount. Based on your job and how much you earn, also how much you can save per month, the amount will be decided. However knowing that you have some amount saved some where is bound to give you peace of mind; it is even better if the amount is not known to your family, as in an emergency when everyone is worried, you can spend from this and make everyone happy as well.
How much to go for?
So how big an emergency fund be, just to get an idea? As mentioned before, it varies based on the person, salary, how much he can save per month and so on, however, financial experts have set the amount to be best between three to eight months cost of total monthly expenses. If you divide that much in the amount you can save for each month, you can calculate the number of months easily.
While an individual’s crisis fund will differ from circumstances to circumstances, most monetary experts approve that a fully kept emergency trust should hold between three to eight months of monthly expenses.
When you think “a few hundred”, with the costs you have to bear it may sound like a huge amount. But if you somehow make that dedication one month, it will be easy to continue.