During this time of crisis, a lot of us have found ourselves in a tight spot trying to cover all expenses and preparing for whatever comes our way for the next few weeks. Sure, none of us knew this was going to happen. But that’s exactly why emergency funds are what they are. Liquid assets you can access for expenses you didn’t see coming. Believe us, your future self will thank you for establishing an emergency fund as soon as you can.
Still on the fence with this? Then here are a few reasons why you need emergency funds.
Debt Payments
It’s easier to manage debt when you have extra money to cover for things you didn’t budget for. You can continue your debt payment arrangement without any fuss even if you face a financial bump on the road as long as you have an emergency fund.
Budget Adjustments
Still new to budgeting? Or had life changes that required you to adjust your budget? Your emergency fund can help you cover some expenses while you adjust to your (new) budget for a year or so.
Just be sure to have the discipline to rebuild your emergency funds once you’ve fully adjusted to your new budget — so you’re once again covered in case unexpected expenses come your way again.
Single Income Source
Having only one source of income can pose as a threat to your savings when an unexpected job loss or illness arises. This is especially so for all of us affected by the current pandemic. Adjustments to your work environment and living situation can take a toll on your financial status. So it helps if you have an emergency fund, ideally a year’s worth of expenses for singles and a bit bigger for those raising a family.
Self-Employed Status
Self-employed and contractual individuals often do not receive the basic employment benefits. That’s why it’s important to set up an emergency fund so you won’t have any trouble in case your contract ends, or should there be any medical emergencies. Business may also be slow during this season so having funds in place can definitely help you keep your bases covered.
Medical Issues
A medical condition can eat up your savings much faster than you had to earn it. Tests and medications, once they’ve added up, can max you out. Your sick leaves are also usually very limited so once you’ve used them all up, you’ll be left with no choice but to take days off without any pay. Your emergency funds can help you deal with these costs, and even offset your losses.
Personal Goals
Looking to own a car, start a business, or build a home? Having an emergency fund helps you avoid touching your savings for any unexpected expenses. You can focus on saving up for your future goals without slowing down.
These may be some pretty confusing times, but as long as you have your goals set and your bases covered, you can be sure to rise above this still financially stable.