Do you know how to build an emergency fund? It’s easier than you think to start building an emergency fund. But, you need to start now!
Having an emergency fund is an essential part of everyone’s financial planning. There are many reasons that you need an emergency fund, and there has never been a greater need to protect yourself and your family than today because of the often chaotic economic climate lately.
How to Build an Emergency Fund
With the economy often unpredictable, it is even more crucial to be prepared for the unexpected. You never know when Murphy will strike, and you can always expect it at the worst possible moment. An emergency fund is the best way to prepare yourself in case trouble strikes.
1. An Emergency Fund Protect You When Unemployment Looms
With the recession and the general state of the economy struggling, job losses are still at a very high level. Even those workers in traditionally safe jobs, like government bureaucrats, are not immune from the possibility of losing their jobs.
It has never been more important to have an emergency plan than it is today. Most financial advisors recommend that you have at least three to six months of living expenses saved in an emergency fund that is liquid and accessible to you in case you need to drip into it in an actual emergency.
Having an emergency fund is essential if you were to suffer from the loss of your job. It is essential that you have money to cover these sorts of unforeseen circumstances especially when you consider how hard it is to get a job at the moment.
2. An Emergency Fund Keeps You From Racking Up Debt
You need an emergency fund to keep you out of debt. Having an adequate emergency fund will at least give you a head start from piling on more debt if you run into an emergency. With an emergency fund, you are less likely to reach for the plastic if you have an emergency if your car breaks down if you have a doctor’s bill that’s not covered by your health insurance, or any other emergency that crops up.
If you do not have an emergency fund, you are more likely to find yourself in debt. And, this could set off a nasty spiral if you are not careful.
If you need money urgently and you do not have anything to fall back on, then you may not have any other option but to borrow the money. Once you find yourself in debt you can often be wrapped up in a vicious circle that is extremely difficult to get out of.
3. An Emergency Fund Builds Good Financial Habits
You need an emergency fund to help you develop good financial habits. Have you ever noticed that good habits lead to more good things? When you start doing going things with your money it multiplies into other aspects of your life.
Other areas of your finances start to prosper as well. Your new emergency fund can be the start of something great with your finances. In essence, an emergency fund can build your financial responsibility. In order to add money to your emergency fund, you will find yourself saving more and spending less.
4. An Emergency Fund Provides Peace Of Mind
An emergency fund can also be beneficial for your health. You need an emergency fund to give you peace of mind. The reassurance of knowing that you have money in an emergency fund to fall back on will ease your mind and make you feel less stressed.
You could even possibly see second-order effects and improvements to your health by lowering your blood pressure, decreasing your stress level, improving relationships with your family, and other benefits.
Putting away a little bit of extra money every so often is a great way to save and prepare for the future. You never know what is around the corner, and in this current turbulent economic climate that we find ourselves in, it is certainly best to prepare for a rainy day. By having an emergency fund, you are ensuring that if and when times are tough, you will have enough money set aside to help you cushion the blow.
Do you know how to build an emergency fund? It’s easier than you think to start building an emergency fund. But, you need to start now!
Do you know how to build an emergency fund? What’s your favorite place for emergency savings?‘
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