8 Reasons You Need an Emergency Fund

01

 You Are Trying to Get Out of Debt:

Your emergency fund can help you stop adding to your debt with each bump in the road. An emergency fund can help cover the things you don’t budget for like car repairs or medical costs. You can use your emergency fund to handle these stressful events and make it easier for you to stay focused on getting out of debt.

• It is easier to pay extra money on debt right away when you have a cushion for unexpected expenses.
• Include your emergency in your budget until it is fully funded.

02

 You Have Just Started Budgeting:

When you first start budgeting, you may be leaving out some of the expenses that you need to plan for. Your emergency fund can cover some of these expenses the first year, and then you can add those expenses into your budget as they come up. This could be annual expenses like taxes or other items like gifts or fees for organizations. Your emergency fund can help you as you adjust to your budget. 

• As unplanned expenses come up, write them down and adjust your budget to include them in the future.
• After a few months, you should not have any unexpected expenses.

03

 You Only Have One Income

If you only have one source of income, it is essential to have a substantial emergency fund. This can help you get through an unexpected job loss or illness that keeps you from working. If you are single or if you the sole income provider in your family, you should work on having a year’s worth of expenses saved up. You can build up the larger emergency fund after you get out of debt

• 04

   You Are Self-Employed or a Contractor

  If you are self-employed, an independent contractor or if you work a job that does not allow you to claim unemployment benefits, it is important to have a good emergency fund saved up. It is also important to have multiple income streams as the amount of work goes up and down. If you know that your contract may end soon, you should work on building up more money in your emergency fund. 

  • Additionally, you may want to plan extra savings for months when business is slow.
  • Keep track of your invoices to make sure that you do not miss collecting on money to avoid needing to use your emergency fund.

• 05

   You Own Your Home

  When you own your home, you will have to pay for all of your repairs and upkeep. Although you should set up a sinking fund to cover remodeling and most repairs, you may have unexpected costs like a plumbing repair or air conditioning repairs. Your emergency fund can help you handle these costs and make owning your home just a bit less stressful.  

  • Home repairs can be expensive, as is replacing an air conditioner or furnace. Try setting up funds to save for these expenses before they occur.
  • Be sure to plan for your taxes in your budget.

• 06

   You Live Far Away from Family

  It can be expensive to travel home, and the costs go up if you need to travel at the last minute for an emergency. It helps to have a good emergency fund saved up to cover the cost of last minute tickets to home or other family members in the event of an medical emergency or a funeral.  

  • Price the cost of an airline ticket and other expenses and start saving up for that.
  • Remember that last-minute bookings are often more expensive.

• 07

   You Have Medical Issues

  A serious medical condition can cause you to max out your deductible each year. You may have routine tests that add up quickly. You may also use all of your sick leave and end up taking days off with no pay. A well-funded emergency fund can help you deal with these costs and make it easier to get through these challenging times.  

  • Medical issues can be expensive and insurance companies may not pay everything that you expect them to pay.
  • You may also miss work and run out of sick pay which can lead to bigger issues. Your emergency fund can help offset this.

• 08

   You Are Saving for a Goal

  If you are working toward a goal like owning a home or starting a business, your emergency job can stop you from dipping into those savings  when unexpected expenses crop up. This can prevent you from moving backward with these goals. Although your progress forward may slow a bit as you rebuild your emergency fund, you will be able to leave the money that you are saving for you.  This is a great way to protect your savings

  
  

.

  

Financial Tips

Financial Tips:

1. Avoid buying property on loans as it eats most of your earnings unless you have a clear plan for its repayment. It's important to monitor cash flow. Though, the house will be your asset, your liability will be much more.

2. Start a SIP at a very young age. Try to save atleast 15–25 % of your earnings.

3. Avoid buying a car unless you use it everyday.
.
4. Do not let this sentence scare you. “Mutual fund investment are subject to market risk. Please read the offer documents carefully before investing”. Most people avoid investing in mutual funds just because of this one warning. Yes, there is a market risk, but look at the history and growth of mutual funds.

5. Try having a simple wedding.

6. Atleast 20% of your wealth should be liquid so you can utilize it when necessary.

7. Considering inflation, you are actually losing money if it is in savings bank account. Do not keep huge money in savings bank account.

8. If you invest in stocks, pay due attention.

9. If you invest in stocks have a separate account for delivery investment and Intraday investment. It is easy to monitor this way and also makes tax calculation easy

10. Do not have a belief that property and car make you rich. Its what you save and invest, that is important.

11. *Never invest in insurance for returns. Insurance is not an investment option. It is a risk management tool.*

12. Never use credit cards for lavish spending. Use credit cards intelligently and for needs not for wants.

13. Cancel all credit cards before you die. Or inform family about all your accounts, credit cards, loans and saving now itself.  Even a small residue will cost your family much.

14. Invest on yourself and then on other investments.

15. Always try to balance your earnings with your savings first, then on  spending and loans. Never take unnecessary loans. Always have reserve and utilise them and unless no other go never take loan.

16. Always have a plan for future events on your career, life, spending and finance.

17. Always have a reserve on your savings for contingency and urgent situations.

18. Your personal life and health are the most important investment. Do have a regular health check and do healthy workout every day. Stay healthy and live happily.

19. Always remember death can come anytime.....so please do buy adequate term Insurance if you have dependents.

20. Prepare a Will. It may avoid unnecessary fights after you die.