I have always talks about the importance of an emergency fund, and how it helps you during times you are experiencing distress, like now. As I have also said, dont always depend on your salary, coz you can never know when it’s going to come in handy. Basically, what I’m trying to say is don’t put your future in someone’s else hands, you might live to regret. The following article by Esteria Maina gives reasons on why you need an emergency fund like now.
Apparently, a good proportion of earning population spends their money to the last coin as soon as it becomes available, never thinking of tomorrow. Others save and invest their excess cash, which is very creditable and a few think of an emergency fund as some sort of insurance, yet it is. One observation I have noticed about problems is that they strike us when we have other very crucial matters requiring first hand financial agency. For instance, you may find that you just lost a loved one, or is very sick and at the same time, your employer is threatening to dismiss you, your lover is divorcing you, your car breaks down, you are lacking college funds for your child and so on. During such times as these, money changes hands faster than before and the next thing people think of is taking out a quick cash loans, borrowings or even selling some of their assets at throw away prices to take care of the expenses at hand.
These without a doubt gives the relief on the short-term, but with high costs at payback not to mention that one is likely to create some irreparable debts. This is why families should strive to keep some emergency funds somewhere, since at times the savings alone may not be adequate to fight back the storms of life. These funds enable one to cater for the unexpected occurrences. and such expenses should be planned for and funds allocated on the family budgets. When this is not done, they become contingencies at some point in our lives and, make us sink in to so many financial problems.
Emergency funds are not to be used to pay for holiday costs, buying any type of present, funding parties and luxurious activities simply because we can do without these if there is no money or they are never urgent. I think it would even be sensible to use an emergency fund to pay a hospital bill for a loved one or yours before you can get in touch with your health insurers and later replace it. Better still, one could use this fund in the period between loosing a job and getting another one for his or her survival in relation to the normal living expenditures.
It is advisable to split accounts in terms of if it is meant to cater for not- a-must-have things in life and those that become pressing. Now that this type of finance is so imperative, one would ask how much allocation is suitable, given specific monetary circumstances. This answer is too personal and depends on first, the amount of salary, commission or wage and one’s financial needs. When one is paid in say commissions, this puts them in such a big risk of having it now, and lacking it tomorrow. In other words, their income may not be as stable as compared to that of a civil servant paid in form of a salary.
Similarly, earning as a casual laborer sometimes means getting a chance today and missing it tomorrow and thus cannot have steady income. As well, consider your employers company permanence in terms of collapsing, downsizing or even your skills being declared redundant after sometime. You may also consider investment in securities that you can easily sell and have some emergency fund, if your health is good or bad all the times, or you are paying for other insurance quotes for your assets and life.
All these factors would obviously provide a good overview of the amount of cash you would require to set aside for unforeseen emergencies.