Financial emergencies happen. Cars break down. Medical expenses arise. People lose jobs. Basically, life happens. However, these events are inescapable, and it is not a question of if they will happen but when they will. To prepare for these situations, one must ensure that they have enough in an emergency fund to survive. The main predicament behind these types of funds is knowing just how much one needs to save to be ready for such situations.
First, you must look at how much you spend on necessary expenses. You should aim to save for about 3-6 months of living expenses you would need to survive. Items to include in this budget are food, housing, healthcare, transportation, utilities, etc. You don’t need to worry about unnecessary expenses such as eating out or shopping because these are the first activities you should cut in a time of financial struggle.
Next, you must weigh if saving only 3-6 months of income is enough. How easy or difficult will it be to obtain another job? Is your income pretty steady? Do you have medical problems that could cause a lot of potential debt? All of these questions should be taken into consideration when deciding how much to save.
Finally, even if you haven’t saved 3-6 months of income due to a lack of finances, do your best to save at least a small portion of your paycheck for an emergency fund. Be smart and cut a few unnecessary expenses if needed to provide yourself and your family with a safety net.
February 13, 2017