Life doesn’t always turn out the way you want it to. Accidents natural disasters; job losses; Problems such as health problems often strike unexpectedly.In times like these, emergency spending can help us.
Key points
- Having an emergency fund is an important part of good financial planning.
- A practical rule of thumb is to save enough money to cover 3 to 6 months of household expenses.
- Saving more money to build spending You need to earn more money and spend less money.
What is emergency spending?
The reason for having an emergency fund
Unexpected expenses – from medical bills to important home repairs.
Loss of income – damage caused by inability to work since the economic crisis.
In the worst case scenario, both of these events could happen simultaneously. For example, unexpected costs due to natural disasters, Job losses can happen at the same time.
Emergency spending is not the same as saving money to buy something. (For example – saving up to buy a new phone.)
There is no fixed amount of emergency spending for everyone. It may vary depending on your lifestyle. If you start saving now, you can start with a small amount.
Why do you need an emergency fund?
Emergency spending is a must.to hurt oneself Losing a job is never planned on purpose, and no one wants to think about it. But if you unexpectedly encounter such situations, an emergency budget will help you.
By having this kind of expenditure, we can withstand the ups and downs of life. You can live in peace without worry. Most importantly, it can help you avoid getting into debt that you can’t pay back.
How much emergency spending is needed?
Everyone’s emergency budget can be different, but aiming to save enough money for 3 to 6 months is a good start.The decision is up to you. You can collect more if you wish.So how much will the 3-6 salary expenses be? To calculate your monthly expenses, write down what you spend on each month.
- Basic food costs
- House rent
- Transportation fee
- Paying meter bills
- Loan repayment
- Money to be sent to parents
- Children’s school fees
Don’t forget to include the cost of your dependents. You must include your needs. As for the things you want, it depends on you.
How to save an emergency budget?
Now that you have set a goal, you must decide how fast you want to go to reach that goal.every day every week The more you save each month, the more you save. The faster you reach this set amount.
Don’t imagine that you can get this emergency budget overnight. You may need to save consistently for many years to be successful.If you’re just starting to save, set a small goal and start saving little by little. First, start saving for two weeks’ worth of food. Then it gradually increased.
Once you have reached your expected amount for your emergency expenses, you can continue saving or change your savings for another purpose.
Maintain an emergency budget
Keep your emergency fund in a safe place. Keeping cash at home is not the safest place. So, you can consider opening a savings bank account saving.If you should just open a new savings bank account that you use every day, open it. So you have to separate your emergency expenses.
If possible, you should get some money back from this expenditure. But you have to be careful not to lose it. A fixed deposit account earns interest but has the least risk of loss. Even if you make an emergency withdrawal before the term expires, even if you don’t get interest, you can safely and conveniently withdraw what you have saved.Because emergency spending is something that needs to be withdrawn as and when needed, buying gold and other items and keeping them as emergency spending is not recommended.
Final tough
Building an emergency budget takes time and discipline. But once you get used to it, it’s not only relaxing, it’s also liberating. In addition, short-term It will also condition you to focus on long-term goals and savings.
