Reasons to Build an Emergency Fund
Setting aside an emergency fund is one of the best ways to be prepared for the unexpected. Most financial advisors will recommend saving at least 3 to 6 months’ worth of living expenses to cover you in case of an unforeseen event. An emergency fund becomes your safety net when you experience an unexpected financial blow, such as a sudden job loss or car accident, and allows a cushion to prevent accruing debt. Below, we gathered more reasons why you should establish an emergency fund.
An Emergency Fund is Your Umbrella During Rainy Days
Emergencies are unpredictable. Accidents, sudden job loss, or any other incidents that can happen may require large sums of money. That is when an emergency fund can help, because it can cushion the expenses. Being prepared for these potential risks can lighten the impact of the arrival. An emergency fund is also a great cushion against debt. Rather than taking from the money you use every day, you can use your emergency fund to pay off a significant amount of your debt in one go if necessary
An Emergency Fund Encourages Saving
Some individuals learn to save through establishing an emergency fund. It motivates them to cut down on unnecessary expenses such as luxuries like television services, additional clothing or eating out. This saving strategy helps some establish the habit of spending only for needs rather than wants. The motivations for saving differ by individual. Some save for future leisure use, while others save for paying off debts and even medical bills. Whatever the reason, after establishing the emergency fund, you are set up to continue saving for your next project.
An Emergency Fund Covers Auto Repairs
Among your expenses, you can say that cars are in a league of their own. Having a fully functioning automobile is important for transportation to work, school or any other commitment. That is why some people will put up an emergency fund for their cars should an accident happen. It’s also a great way to cushion your expenses during routine maintenance. Your emergency fund can also be used for the events of repairs and other matters concerning your utility.
When to Evaluate your Emergency Fund
Once you have established an emergency fund, it is advisable to revisit your emergency planning periodically. As your financial needs and living expenses change, so should your emergency fund savings increase. An opportune time to reevaluate your account is with any major life change, such as marriage, children, new job, etc. You should account for any new or changed expenses like children’s education, potential medical bills and the number of cars your family operates.
Get Help to Make Wise Financial Decisions
Matters concerning your money and future are always important. As such, you may need help from trustworthy financial advisors. Partner with Firefighters Credit Union in Onalaska, WI today. Let us help you make smart financial decisions to help you live comfortably.