Emergency Funds—An Important Part of Financial Planning
When it comes to your finances and your personal financial situation, it’s always best to hope for the best and prepare for the worst.
There are a lot of financial difficulties that you can run into without much warning or preparation.
For instance, you could lose your job, face a fortune in-home repairs or need a new car.
You might even decide you need a career change and end up out of work for a good few months.
How long are your savings going to last in a situation like this?
For most people, the answer is not long at all.
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Many won’t even survive a couple of months before they start needing to survive on credit and loans.
Financial experts suggest that you should have at least three to six months’ worth of savings to cover living expenses.
This is often the time it will take to find a new job if you are made redundant.
If you rely on a credit card or a loan, then you could push yourself further into debt so you need to get serious about setting up that emergency fund.
Make A Budget
The first step should always be to set a budget.
A budget will ensure that you can keep track of what you are spending and how much you should be saving each month.
Ideally, you should be looking for levels of waste in your budget and finding out how to eliminate it effectively.
Make sure that you are tracking any expenses that you do have.
You should also think about using cash to cover impulse buys.
Get Your Money To Work For You
The next step is to make sure that your money is growing without you taking any action at all.
You can do this if you open a savings account.
You should set a fixed amount to be sent to that account in savings each month.
In doing so, you can guarantee that you are always adding to your emergency fund, even if it’s just little by little.
Finally, you do need to make sure that you are being realistic with your goals for savings.
It’s understandable to want to save as much as possible.
But if you’re not realistic then you won’t hit your target and this can make you feel as though saving anything at all is pointless.
We hope this helps you understand why emergency funds are so crucial in terms of financial planning.
With the right amount in place for a rainy day, you can make sure that any existing debt doesn’t build up further and keep your credit in check.
If you are dealing with significant levels of debt, we can help.
We have supported 100,000 Canadians with debt relief so you can rest assured we can help you too.
Call us today or fill out a free evaluation form to get started.
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