The pandemic has taught us that life is full of unexpected situations, and we must always be prepared to cope with such adverse circumstances. No one wants to spend their time contemplating worst-case scenarios anymore, which means being financially prepared is the only solution—and one important way to do so is by having an emergency fund.
What is an Emergency Fund?
An emergency fund is an essential amount that you must keep aside to tackle unforeseen emergencies. It may include unexpected medical bills, tackling unemployment, family emergencies, and much more.
An emergency fund should cover a minimum of 6 months of your expenses, but ideally, it should cover a full year’s expenses. The main criteria of an emergency fund are to save you from debts, constant stress, and financial struggle. Essentially, it is a buffer that can keep you afloat in times of need.
Why Should You Have an Emergency Fund?
You Lost Your Job
People can lose their job unexpectedly, and it can take time to find a new one. Especially during the pandemic, job losses were rampant. Without an emergency fund, it can be difficult to pay rent, utilities, etc., but an emergency fund will help tide you over until you can find another job.
Additionally, during a recession or other adverse situations, your income or salary may reduce due to uncertainties, but your expenses will remain the same or increase with each passing day. An emergency fund can help you account for this disparity while you look for other solutions.
You Only Have One Income
If you are the primary breadwinner with only one source of income, it is essential to have a substantial emergency fund that can help to get through an unexpected job loss or illness. If you are single, then it’s advisable to work on building up your emergency fund as quickly as possible. And if you have just started a family or are going to start one, you may need to increase your emergency fund.
Unexpected illnesses or major accidents are unpredictable, and one of the many reasons people stash away money. Even if you have medical insurance, you still may have to pay for all or part of the expenses out-of-pocket. In fact, some procedures require immediate cash or may not be covered under insurance. In that situation, rather than scrambling around for money, you can rely on an emergency fund.
Saves You from Making Bad Financial Decisions
When there is no financial backing to deal with life’s worst surprises, people tend to make unwanted and rather bad decisions. They borrow money, take various loans, over-exercise credit cards, sell property/assets on a whim, hamper retirement funds, etc., to make ends meet. Such decisions can have a long-lasting impact and may become really difficult to overcome.
You can save yourself from such a financial crisis with an emergency fund in hand.
How Can Briteside Solutions Help?
Life is full of unexpected surprises, and it’s important to be prepared for them. At Briteside Solutions, we offer practical advice and support to help build up emergency funds and put your worries to rest. If you want to secure your future and save funds for a rainy day, get in touch!