Emergency funds are a monetary resource that you use to plan for times when your usual cash flow may be interrupted, or cut off completely. The various aspects of saving will be considered, and based on what you need to spend on and for, this is how you would grow your fund.
Types of Expenses
When planning, it is important to consider all the essential expenses that you have responsibility for. In the home, you can consider rent/mortgage, property taxes, insurance, repairs and utilities. For transportation, there would be loans, insurance, gas, public transport, and anything else like toll fares and repairs. Health-wise, there’s different kinds of insurance and prescriptions for necessary medicine. Where food is concerned, groceries would be essential. If you owe debt, these repayments would need to be considered as well. These funds can be done on various levels of necessity. You can go for 3-6 months, or even 1 or 2 years. The length of time you choose depends on your level of discipline.
How To Start
In order to build an emergency savings fund, you can start by saving up your coins and small change. Some other tips that work include selling items you don’t need, taking a week-long spending fast (so no spending on anything that’s not necessary), setting aside 15% of your income each month and doing side jobs to get some additional money.
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As we grow, we improve our ability to earn more money and spend on more things. However, just in case of emergencies, it is best to start working on an emergency fund as soon as possible. Depending on your essential expenses, this will be the amount you save on a monthly/yearly basis. That way, you can be prepared when emergencies occur.