Eight Reasons to Build Your Emergency Fund

Benefits of an Emergency Fund

You’ve probably heard that it’s a good idea to have an emergency fund. Maybe you’ve started, or thought about starting one. Disciplining yourself to save money for the uncertain is a great way to begin to build financial stability, and ultimately wealth over time. Moreover, most financial advisors will recommend that you save up at least 6 months of living expenses before doing any investing. With all of that being said, it can still be hard to sit down and plan a hypothetical financial future. It does discipline to do it, and even more to follow through. We’ve got eight reasons to help get you motivated to start saving!

 

Job loss – Regardless of your employment tenure, the fact is that most people are often caught completely off guard by job loss. Whether it be your job or your spouses, relied upon income disappearing can wreak havoc on budget and a household. Moreover, even if you find yourself qualifying for unemployment benefits or severance pay, it could be weeks before you see it.

 

Home repairs or rent increase – Whether you’re renting or owning, either one can see drastic changes in cost in relatively little time. Throughout most states, landlords can increase your rent at the end of a fixed-term lease. However, if you’re month-to-month they can likely increase it after 30 days. If you’re owning, various home repairs from appliance replacement to roof maintenance can easily run into the hundreds or thousands of dollars.

 

Car trouble – It’s widely known that your car will last a long time provided you perform necessary repairs as they come, and get tune ups. However, there are any number of that could set you back big in terms of your vehicle. For example, a new set of tires often runs in excess of $1,000. Fixing brakes runs anywhere from $500 – about $1,000. By having an emergency fund set aside, you’ll be able to take these financial hits without having to go into debt, and pay interest.

 

The holidays – While they are a time of joyous family dinners, opening presents, and relaxing, the holidays are stressful, and they are expensive. If you find that find that you have any unexpected costs around the holidays, the two could compound to spell disaster. Notice the difference – it would wise to have an emergency fund in addition to a presents fund! This way, if that unexpected expense does rear its ugly head, you’re prepared!

 

Peace of mind – Frankly, it’s difficult to put a price on peace of mind. That said, most of us would agree that we could always use some more of it! According to a study by the American Psychological Association (http://www.apa.org/news/press/releases/2015/02/money-stress.aspx), 64% of Americans report that “money is a somewhat or very significant source of stress.” By setting money aside for potential hard times, you can become a part of the 36%, and reduce that daily stress and anxiety!

 

Medical bills – Even if you’re healthy, a medical emergency can strike at any time, and they certainly don’t wait until you feel financially stable enough to handle them. These problems are compounded greatly if you don’t have health insurance, as the costs have to come out of pocket. Moreover, even with health insurance, not everything treatment may require could be covered – which can leave you with a big bill. Without sufficient funds, it’s easy to revert to a credit card with high interest rates to pay down debt.

 

Pay off debt – Once you have amassed enough money in your emergency fund to cover six months of living, you have a number of options. The most important thing is that you have shown yourself you can save effectively. From here, you ought to be paying off any debts still lingering, whether they be school or personal loans, credit car bills, or others.

By |2018-03-07T22:08:21+00:00March 1st, 2016|General Finance|0 Comments

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