Ways of Priority Funds Emergency – It was not easy to set aside some of the money only for stored or ‘ silenced ‘.
Therefore, this time Businessoldnet will give you some tips that can help you set aside an emergency fund!
Overview Of The Emergency Fund
An emergency fund is a Fund of savings that you can use in an emergency which may include termination of employment relationships, accidents, diseases, etc which is suddenly.
Emergency Fund has an important role in financial planning due to the nature of events that suddenly can make a financial mess and may result in unmet needs.
The amount of emergency funds is certainly different from other households with 1, depending on income and the needs required by each family.
Ideally, for a single, minimal emergency fund should be totaled monthly living expenses of 4 x, married to amounted to 6 x, which already has 1 child numbered 9 x, and so on.
Basically, this emergency fund should be enough to meet your needs until you can come back to its original position.
For example, You get fired from a job, then the emergency fund should be able to meet your needs as well as family (if married) for a certain period until you can find a new job.
The Benefits Of An Emergency Fund
Many people underestimate the importance of this emergency fund, and most of them don’t even have the slightest emergency fund.
The basic benefits of an emergency fund are as a reserve fund in case of emergency it can be damaging to your financial stability.
In addition, psychologically, the existence of an emergency fund can help lower stress levels.
This is because you already have a ‘ handle ‘ even at the time of emergency things happen.
Having an emergency fund also prevents Your impulsive shopping and making the wrong financial decisions, such as using a credit card over the limit because it can’t afford to pay, owe with interest loan is too high because it does not have money and others.
How To Set Up An Emergency Fund
- 1 devised a plan and Take Action
Once you know the importance of setting up an emergency fund, then it’s time for you to prepare your finances.
How to have a sufficient emergency fund, you can in the same way as other financial goals.
Start by putting together a financial plan to achieve the ideal emergency funds.
The first step is to find out how much your monthly spending, and categorized each post spending bill, for example, transport, consumption.
This categorization will make you easier to increase or decrease the expenses itself and the amount of the emergency funds it needs.
Once you figure out the number of monthly expenses, then multiply by the numbers (3 x, 6 x, 9 x, or 12 x) corresponds to a family member that you must are living in.
Once you get the amount of funding you need, calculate how many funds you can set aside.
- 2 reduce spending
The first execution was set aside funds for post-emergency fund by reducing spending.
One of the tips so that your finances are lighter though should set aside a portion of revenues to fund emergency is by controlling your expenses.
You can reduce the expenses that are not urgent and frugality.
Look for cheaper substitutes or shopping only at the time of the discount.
Daily needs that face small may look quite help fill the post-emergency fund if you eliminate.
For example, buy food outside comparison of cooking your own food.
Using private transport at a time when public transport is cheaper and so on.
- 3 set aside directly from Earnings
Suppose an emergency fund a debt, where you have to pay each month.
You should set aside a portion of this income at the beginning of the month. If you often forget or have a busy schedule, you can use the automatic periodic transfer facilities from your savings account.
In this way, you’ll be more disciplined cull your savings.
Instantly set aside some of the money from your earnings, which is the percentage of income rather than a number of nominal. Why is this so?
Because of the higher income you get, chances are, you spend will be spending more, meaning that emergency fund that you need.
By using percentage system, then the higher your income, the more that You set aside for your Emergency Fund.
5% – 10% of the total of your monthly income is the minimum amount you need to set aside each month.
If Your income is mediocre and just enough to make ends meet monthly, then another smart way can by way of collecting the entire DIME you have.
Although face not just how, if collected, over time the number will be quite large.
You can also allocate the extra cash you receive, such as a monthly bonus, THR or even cashback from shopping.
- 4 should be allocated in the right place
Keep an emergency fund is not a means only in the form of cash in savings.
You can allocate a portion in the form of deposits or investments in gold.
You can also select other financial products that have similar properties, namely the high liquidity, the easy and safe, such as mutual funds, money market mutual funds, and securities.
If you need an emergency fund, you can withdraw funds in savings, then in deposits, and the last is selling precious metals or gold.
How it can help you control your self to not be tempted to spend the money.
In addition, the emergency fund you will develop faster because of the advantages of the financial products that you choose.
- 5 evaluation of the emergency fund
Each year, the income and the expenditures you earn or spend is certainly not the same.
This means the post-emergency fund you need revision to match your latest needs.
This emergency fund evaluation should be carried out every end of the year or the beginning of the financial year so that You will remain stable despite the sudden emergencies.
The discipline and Routine
If you need $3000 every month to meet household needs, then at a minimum you should prepare an $18,000 as an emergency fund.
The number $18,000 is not the least bit let alone every month there are expenses that you must finance.
Here, discipline is the key. With discipline, you won’t be wasting money freely, with discipline, the emergency fund you will keep growing.
If You have prepared an emergency fund as insurance for your finances?
How much does the amount you set aside each month and do you have any tips on how to allocate emergency funds? Share your experience in the comments field below.