The ongoing pandemic is a wake-up call reminding us that the future is uncertain. Unexpected situations such as illness, termination of employment, accidents can occur at any time. An emergency fund can help you deal with these unforeseeable situations and act as a safety net.
Do You Need An Emergency Savings Fund?
An emergency savings fund gives you the financial backing in tough times and allows you to stay afloat without having to rely on loans or credit cards. Financial experts recommend building an emergency fund so that you do not have to borrow money or rely on any third-party when an emergency arises.
Building a Successful Emergency Savings Fund
Starting an emergency fund may look difficult, especially if you have existing debt. But with the right planning and budgeting, you can start saving and successfully build a viable emergency fund.
You can start building your fund today by following the steps below:
Define Your Emergencies: The first step is to define unanticipated expenses will classify as an emergency for you. Buying a new car or a new TV set may not be an actual emergency. Hence, it is important to first define your emergencies when you can use the fund.
Set Aside your Budget: The next step is to decide your budget. You can begin by creating a list of your monthly expenses like food, rent, utilities, and associated household bills and set aside an amount that will be contributed to your fund. You can seek help from online calculators provided by financial institutions to determine your monthly expenses, and your savings budget.
Make a Contribution: Once the budget is fixed, start making monthly contributions to the fund. The best way to handle this is by setting up auto payments so that you are regular in your contributions. In the beginning, you can also add the amount remaining after taking out your monthly expenses and monthly contributions to your fund so that you are prepared for any short-term emergency. Once your fund has grown to a substantial amount you can go back to contributing your set amount feeling relaxed that you are ready for any unexpected situations.
Start Small: Your savings goals may seem overwhelming in the beginning but do not allow it to discourage you. A successful emergency fund starts with setting up realistic goals and making small contributions thereby creating a long-term habit of saving.
Monitor your Progress and Celebrate Success: It is recommended to check your savings progress regularly. When you realize that your savings are beginning to grow, you will appreciate the efforts you are putting in and see that your goals are being realized. It is also important to celebrate your success and not hesitate to take funds out of your emergency savings when you are actually facing an emergency.
The pandemic has made us realize that finances can be fragile and it is important to have a fallback option to deal with unexpected situations. We cannot predict our future but by creating a successful savings fund, we can reduce our risks and strongly face any emergencies that may arise.
For more information on how you can better build your emergency savings fund, visit this page: https://blog.rexhomes.com/a-step-by-step-guide-to-building-your-emergency-fund/