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| Metal by Wax115 |
Do you have emergency savings fund?
If you have more than 6 months expenses of your household in savings, go ahead and skip this message. If not, I humbly ask you to read on.
The reason I write this article is because of someone's testimony that I heard recently.
A person had just totaled his car due to bad weather (snow and ice) in Texas. To keep his job he needed a car, so he looked for a car around to buy.
The problem is he couldn't find car that fits his budget easily. Thank God, he found one. Unfortunately, again due to his limited budget at hand, he didn't have many financing options. So, he took the only available one and he has to pay monthly payment for four years that will sum up to at least TWICE of the actual car price.
The outcome of this situation can be better if that person has enough emergency savings fund. He would get better finance rate, or, buy a used car in cash.
This is only one example of how emergency savings fund can help. As the name suggests, we don't know when this fund is needed. But life is more dynamic that we hope for, and although we feel that we're financially stable because we can afford our lifestyle every month, most of the time it only takes one single unfortunate event to turn everything around. Accidents, repairs, natural disasters, sickness, job loss are some of the examples of these events.
How much emergency savings fund do we need?
Ideally, 6 months of your household expenses. This will make sure that in case of job loss, you have enough buffer to pay bills and keep food and housing.
But, we got to start somewhere to achieve this amount. So, here are the steps that I suggest.
- Have $0 emergency fund? - achieve to save $1,000
- Have $1,000 emergency fund? - achieve to save 1 month expenses
- Have 1 month expenses emergency fund? - achieve to save 3 months expenses
- Have 3 months expenses emergency fund? - achieve to save 6 months expenses
This emergency fund should be in form of cash savings in bank that we can withdraw anytime. Don't count on other type of assets that are not liquid such as house, lands, vehicles, etc. They need to be sold first, and when you need the money fast you might take the lowest offer.
Sacrifice short term happiness if needed
If you think that having that amount of savings is hard, don't forget that it's even harder to be in a bad situation. So, if you need to change your lifestyle in order to achieve the amount of emergency savings fund you need, then do it.
I'm done.
Please submit poll below. Don't worry, it is completely anonymous.
Do you have emergency saving fund?
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