Make Hay While the Sun Shines
Life is a bit of tricky and is quite unpredictable with full of uncertainties that comes in many forms. While we are busy planning for our life, life is having its own plans for us.
No difficulty comes after knocking on ones door to indicate him and allow him to be prepared for it. But in such a case an emergency fund will always help anyone to be prepared for such situations and to take them head on.
It is always better to have a hefty amount of money saved which we can term as emergency fund which is set aside to meet the extra expenditure that is a result of emergencies that could tighten our monthly budget when we are not prepared for such conditions.
Emergencies can be of any type like a sudden loss of employment, a critical disease, illness, an unfortunate accident requiring treatment of life and repairs for damaged property, a dear friend in dire need or anything else. Maybe this would not be necessary for all the situations as anyone of us may have an insurance to cover up all the extra expenditure.
A health insurance plan can cover all the hospitalization and critical illness costs, vehicle insurance may cover all the accidental damage and property insurance maybe used to protect the home and property contents in terms when damage occurs. But for every other situation that occurs in front of us insurance is not able to cover it up, in such case we need liquid cash.
In such cases having an extra saved amount will help us reduce the burden of taking a personal loan at higher interest rate, or a loan against a property or it will help us to reduce to need to max out our credit cards. So what are the ways to build a emergency fund that would help us in emergency situations, let’s have a look:
Step 1 - Choose a Fund Size
Picking up a proper amount that needs to be saved at regular interval is a tricky task. At least saving an amount that would compensate for about three to six month is an ideal amount to be saved as an emergency fund. While choosing the amount choose an amount that would cover up the basic expenses of an individual. Building such a large fund is not an easy job. A recurring account is a good way to start building this type of fund.
Step 2 - Choose a Place to Keep the Fund Amount
As we all know that emergency situations and cash liquidity go hand in hand, we require fast cash in difficult situations. The emergency fund can be locked into a fixed deposit or a high interest saving account. A fixed deposit avoids the temptation of using this saved amount. The emergency fund can also be collected over a long period through equity mutual funds SIP’s. Also it is safe to safeguard the fund by converting it into debt instruments once the fund target is achieved, since keeping the emergency fund to prolonged market volatility could reduce the liquidity if emergency arrived during a market crash.
Step 3 - Keep Building Your Dreams
Income for a person increases over the years through salary hikes, but our spending increases at a double rate as we grow up. Our monthly expense increases as per our increasing number of wants day by day. So in order to meet the overall needs of day to day expenses and the need of hard cash during hard times, start saving and keeping on adding to the emergency funds as soon as possible and at regular intervals.
No difficulty comes after knocking on ones door to indicate him and allow him to be prepared for it. But in such a case an emergency fund will always help anyone to be prepared for such situations and to take them head on.
It is always better to have a hefty amount of money saved which we can term as emergency fund which is set aside to meet the extra expenditure that is a result of emergencies that could tighten our monthly budget when we are not prepared for such conditions.
Emergencies can be of any type like a sudden loss of employment, a critical disease, illness, an unfortunate accident requiring treatment of life and repairs for damaged property, a dear friend in dire need or anything else. Maybe this would not be necessary for all the situations as anyone of us may have an insurance to cover up all the extra expenditure.
A health insurance plan can cover all the hospitalization and critical illness costs, vehicle insurance may cover all the accidental damage and property insurance maybe used to protect the home and property contents in terms when damage occurs. But for every other situation that occurs in front of us insurance is not able to cover it up, in such case we need liquid cash.
In such cases having an extra saved amount will help us reduce the burden of taking a personal loan at higher interest rate, or a loan against a property or it will help us to reduce to need to max out our credit cards. So what are the ways to build a emergency fund that would help us in emergency situations, let’s have a look:
Step 1 - Choose a Fund Size
Picking up a proper amount that needs to be saved at regular interval is a tricky task. At least saving an amount that would compensate for about three to six month is an ideal amount to be saved as an emergency fund. While choosing the amount choose an amount that would cover up the basic expenses of an individual. Building such a large fund is not an easy job. A recurring account is a good way to start building this type of fund.
Step 2 - Choose a Place to Keep the Fund Amount
As we all know that emergency situations and cash liquidity go hand in hand, we require fast cash in difficult situations. The emergency fund can be locked into a fixed deposit or a high interest saving account. A fixed deposit avoids the temptation of using this saved amount. The emergency fund can also be collected over a long period through equity mutual funds SIP’s. Also it is safe to safeguard the fund by converting it into debt instruments once the fund target is achieved, since keeping the emergency fund to prolonged market volatility could reduce the liquidity if emergency arrived during a market crash.
Step 3 - Keep Building Your Dreams
Income for a person increases over the years through salary hikes, but our spending increases at a double rate as we grow up. Our monthly expense increases as per our increasing number of wants day by day. So in order to meet the overall needs of day to day expenses and the need of hard cash during hard times, start saving and keeping on adding to the emergency funds as soon as possible and at regular intervals.
No comments: