6 Reasons You Need An Emergency Fund
An emergency fund can serve multiple purposes but in simple terms, it’s money that is set aside as a financial safety net for future emergencies or unexpected expenses.
Things happen in life, whether your car breaks down, you lose your job or an illness arises an emergency fund will help you stay afloat with your bills and expenses in case something like this happens.
There are many reasons you need an emergency fund but these 6 reasons should be enough to convince you to start building an emergency fund today if you haven’t already.
1. You’re Paying Off Debt
Having an emergency fund will help you avoid going into more debt in case an unexpected expense pops up along the way.
An emergency fund can cover the costs for things that you don’t typically add into your budget such as car repairs and medical expenses.
2. Sudden Job Loss
If you’re reading this then you probably know someone that has been laid off in the past year if you haven’t been yourself.
Job security just isn’t guaranteed today, so you have to protect yourself in case you lose your job.
Having a few month’s worth of expenses saved up will make sure you have some time to look for new employment and figure out your next steps in case of a sudden job loss.
Protip: Start a side hustle or invest some extra money to create an extra source of income for you to limit the risks of financial hardships.
3. Car Repairs
If you own a car then it’s more than likely that sudden maintenance and repairs are going to happen every so often.
Instead of taking on debt to fix the situation having some cash put away for situations like this will keep you on track with your financial goals.
4. Injury/Illness
Life is filled with unexpected situations so it’s best to be prepared for those times.
If you ever have to take time off work due to a medical emergency having an emergency fund will protect you from your loss of income for that period of time.
Protip: Have proper medical and life insurance.
5. You’re Self-Employed
The statistics show that most businesses fail within the first few years so if you’re a self-employed person it’s best to stash away some money in case you need it.
Protip: Make sure you’re always setting aside the required amount for taxes if you’re self-employed or an independent contractor.
6. Unexpected Pet Expenses
Pets can sometimes fall ill or require treatment for certain ailments.
If that does happen, vet bills are not cheap therefore you need to be prepared.
Protip: Set up an extra savings account for pet expenses and add $10-$20 to it every pay.
You won’t always be prepared for every emergency but you can do your best to protect yourself.
With the right emergency fund in place, you can avoid a whole lot of financial hardships and debt.
If you’re ready to start your emergency fund, start small. Aim for $1000 at first then 3–6 months' worth of your monthly expenses.
An emergency fund can do so many things for you if you start building it now.
Let me know in the comments below if you have an emergency fund and how many months do you think is a comfortable number.
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