Emergency Funds – YOU NEED IT!

How’s building your Emergency Fund going? 

You may be shocked at the question. Emergency Fund? What Emergency fund? That thing full of cash everyone should have incase  – you guessed it – an emergency.

Per Google: “An emergency fund is a dedicated pool of money set aside to cover unexpected expenses or financial hardships. It acts as a financial safety net, preventing you from going into debt or jeopardizing your long-term financial goals when faced with unforeseen circumstances.”

Emergency funds can make or break your financial goals to get out of debt.

Now let’s be clear on what an emergency is NOT:

• Christmas is not an emergency; it comes on the same date every year.
• Your best friend’s last minute birthday dinner is not an emergency; THEY should have planned better. Their lack of planning does not mean an emergency on your part.
• The oil-change on your car is not an emergency, you know that it comes around every 3,000-5,000 miles.

Again, these are not emergencies, they are inconveniences.

An Emergency IS:

• A medical emergency that requires hospitalization or emergency surgery.
• A car accident that totaled your car.
• The death of a loved one back home

Having cash stashed away to cover true emergencies (such as those listed above) can be a game changer in your finance journey. It allows you to pay for an emergency without forcing yourself into more debt. Do you find yourself panicking at a slight inconvenience or instead are you able to pay it without a second thought because you’ve got a solid emergency fund to dip into? 

Ultimately, 3-6 months of fixed expenses should be your goal to cover anything that comes up. (This should be more if you are an entrepreneur or your income is not stable). Anything that ‘comes up’ includes a job loss or other true emergencies. You may think that is a lot of cash, and it is. But think about it, if you suddenly get hurt and cannot work for 8-10 weeks, there goes your 3 month reserves in the blink of an eye. And with the job market the way it is, if you suddenly lose your job getting a new one could take a while. You want to be sure the future you is set up to be less stressed in case anything were to happen to current you.

NOW that the nitty gritty is out of the way (once you have your 6-month emergency fund stashed away in a High Yield Savings Account (check out my last blog here if you want more info)) THEN you can begin to use any extra cash for other things. For example, paying down debt, investing, saving for school or a new car, etc.

How far along are you in your Emergency Savings goal? Are you honestly prepared for a true emergency, or do you just have a couple of hundred dollars stashed? That is a good start, but let’s all do better and really set ourselves up for greatness in the time of trouble.

-Adele- 

#EmergencyFund #EmergencySavings #RoadToDebtFree #HYSA