Deadly Requirement: Emergency Fund

Life is just like a cricket game. Till the last ball, you can’t be sure of the win. Even one over or sometimes, one ball can change the scenario of the match. Life may be appearing too healthy or happy but just one natural or accidental step may put you in the situation which would be totally out of your control and even imagination. So, one rule we can apply to the life is that the most certain thing in life is the uncertainty of life.

Why to prepare the emergency fund?

The unpredictable nature of life is really difficult to understand. A nice thought by a philosopher is that “you can learn any language of the world but not the nature’s.” The success and occurrence sometimes not even consider our full proof careful approach of particular plot, even the loyal and sincere efforts towards it and the worthiness of ours to achieve it. The things are always in account for which you didn’t account for. Let’s check some of the deadliest examples of our routine life which happens so often with us. For example, you’ve got medical insurance so you think you’re okay. But what happens when you need an expensive prescription only to discover that it isn’t covered. You’ve got homeowners or renter’s insurance and you’ve insured your wedding ring. But what happens when an unexpected bundle of joy is delivered, or you decide to send your little darling to an expensive private preschool?

It’s not enough to make sure you’ve paid down your credit card debt or to make sure you are investing for your eventual retirement. An emergency fund must be a part of any sound financial plan.

Most of the people are totally dependent on their employers for their income, tax payments and also the medical benefits. But, just have a wild imagination and also the most happening things of these days that if all of a sudden, without any fault of yours, you are laid off, then what? You are liable to pay so many things of yours without any intimation of life and also at the time when you are lacking your regular income also. No matter where you stand financially, it’s going to take you awhile to get back on your feet.

So, one thing even you would also start believing that the emergency funds are bound to maintain and also the fund is the deadliest requirement of this time of slowdown and unpredictable finance sector. But, the question which is always creeping in mind is that how much fund is required for the emergency?

How to prepare it?

See, the ideal situation suggests that a wise man must keep at least three to six months’ expense in the savings account in advance before making any new adventure or the expense. But, the way risk of job cutting and the future slow down is seen, the six months will definitely not prove the sufficient savings. Keep in mind that every individual is different and your expenses will vary depending on what time of year it is. You might have a particularly expensive hobby, like going up to Lake Tahoe every weekend to ski during snow season. Or you might need to pay a piano teacher for lessons each week. If you’re thinking that these are luxuries that can be cut back on when disaster strikes, you’re right. But ideally your emergency fund should allow you to maintain the same quality of life you have now.

The most important and most required thing for the preparation of the emergency fund is the set up of a proper budget. First of all you list out all the luxurious expenses of life which are definitely worth of cutting and let the fund to add in savings of the emergency fund. It’s especially important to pay attention to those reoccurring payments; grocery bills, car payments, rent or mortgage payment, internet access and phone bills, electric and water bills, that can’t be entirely eliminated.

Also try to make the investment of the saved money as we are not saving them to keep it under mattresses. The money will never get doubles by keeping them under mattresses, they get double by investing them in a proper sector or the place to earn in the market.

But if you believe that it’s not the right time to invest and you don’t find any good place to make the money, it would really be better  to keep them under your mattresses as it’s better to stock them, rather than losing them in stocks.

So, make an emergency fund immediately, prepare you budget, save form the luxuries and make the right thing out of it. Have a pleasant and tensionless Recession!!