Life has a way of coming at you unexpectedly. One minute things are fine and the next something goes wrong and you have to deal with it. As you may know, a lot of life’s troubles are directly tied to your finances. You suffer a death in the family or go through a divorce, for example, there is a loss of income that you’ll have to make up for, which can make things particularly challenging. Though you can’t prevent those things from happening, you can be prepared by having an emergency fund.
What is an Emergency Fund?
Simply put, an emergency fund is a savings account with funds that are set aside for emergency situations. This can include anything from a job loss or income reduction to a home improvement or car repair. Since the average household can’t easily obtain hundreds or thousands of dollars an emergency fund serves as a cushion or financial protection. Though any money set aside is better than none, you should aim to save at least three to six months of your monthly income.
A Backup Plan is Important Too
Emergency funds are ideal for covering the cost of things you didn’t factor into your budget, but can’t wait to fulfill. Be that as it may, it can take a while to save up a large enough amount to use for serious or immediate emergencies. In that case, a backup plan can provide additional coverage.
Borrowing the money may be an option. You can apply for a payroll advance online, and if eligible, receive a deposit within 48 hours. To apply you’ll need to be at least 18, have verifiable income, and a savings or checking account for deposit. Repayment options are set up on a bi-weekly or monthly basis including interest.
Benefits of Having an Emergency Fund
You just never know when there’s going to be a problem that requires more money than you presently have to spend. Setting aside a small amount of money now for coverage in the future has benefits that include:
When financial issues arise, critical thinking tends to go out the window. Often to resolve the problem quickly, people will resort to using their credit cards or trying to finance products and/or services to cover the costs. Though sometimes necessary, the use of credit cards or finance contracts includes interest and the potential to ruin your credit history if not repaid in a timely fashion. If you have the money tucked away to cover the costs, however, there is no need to pay interest.
Peace of Mind – There is likely nothing more stressful than the inability to deal with financial matters. They tend to absorb a lot of your time and focus, and if not dealt with immediately, can cause more serious trouble down the road. Although what you’re going through may still take time to heal from, having the money to resolve the matter immediately takes a lot of stress off of you.
Putting money to the side for a rainy day isn’t something you should procrastinate on. Life has a way of throwing curveballs when you least expect it. To keep things in order and make those challenges easier to deal with, it is ideal to have an emergency fund. This nest egg saves you money and provides you with the peace of mind you’ll need to handle whatever life throws your way.