Expecting the unexpected is being shrewd in finance. There are a lot of uncertainties in life, underscoring the need to be financially prepared. According to finance experts, it is vital to save an amount that can cover your total expenses for up to 6 months.
Why? With such an amount, it can be easy to sail through financial eventualities, such as losing income or financing a large bill. In other words, saving for emergencies is the chief cornerstone of financial preparedness. Even though many would love to adhere to this piece of advice, statistics show a surge in the number of individuals without emergency savings. One of the most disturbing facts about emergencies is the fact that it can plague everyone without discriminating. You might well off financially with a high level of income.
But get it right from me; such things cannot secure you from financial disasters in the days to come. To reiterate the need to safeguard yourself, here are 7 great reasons to have an emergency fund.
Owning a Property Require Emergency Funds
Do you have a car or own a home? If yes, you should have an emergency fund. What will happen if your car is involved in an accident? What if there is a need for an urgent repair of your home? These are some of the things that necessitate saving for emergencies. It will be absolutely ridiculous to start thinking of where to get finances after a problem has already occurred.
Statistics show that at least $500 goes to car repair. Statistics from real estate shows that an annual home repair and maintenance may cost $2600. While you can get the necessary assistance from insurance, there are other deductibles that you will have to finance even after successfully receiving your claim. Having an emergency fund to turn to will protect from such issues.
One Income Source
While you are always optimistic, you cannot close your eyes to the reality of job loss. Think of what has happened during this covid-19 pandemic. The economy has been shaken beyond expectations. Many businesses and companies have been closed. Millions of individuals have lost their jobs worldwide. But then, no one may have anticipated that the situation may turn out to be this way a year ago. Have you lost your job? If not, prepare yourself to address such an issue in the future.
How can an emergency fund salvage your condition? There are at least two ways here. One, you will still be able to respect your financial obligations, pay bills, and still provide for your family as you look for another job. Second, you will not be forced into taking a loan. An emergency fund will protect you from the desperation that would come with watching the bills piling. You will be in a better position to evaluate the situation and make sound decisions.
High chances of high medical bills
You may have taken insurance cover, but still, the out-of-pocket costs can be too much for you in case of a medical emergency. Even a visit to the emergency room can be costly. Such unforeseen medical expenses can be covered with emergency funds. And do you think medical insurance can always cover all the costs? If you think so, you are misguided. Do the research. You will discover that during the COVID-19, in some countries such as Kenya, the National Health Insurance Fund had insufficient funds to cover medical bills due to the pandemic. This was an unexpected turn of events. So, save for emergencies now to avoid putting your life at stake in the future.
An emergency Fund can help Get Out of Debt
Many people have tried to pay off debt unsuccessfully. Most of them have fallen back into debt even after it appeared that they were successfully managing. Unbudgeted expenses often force individuals to take loans. With an emergency fund, you can easily finance unexpected bills, such as house maintenance and car repairs, without borrowing. This will help you remain on the path to success if you have a goal of getting out of debt.
An emergency Fund Helps with Budgeting
Creating a budget and using it are two different things. However, you need to stick to your budget to be successful in managing finances. If you are starting to budget, there are possibilities of not including everything in your budget, including some basic needs. An emergency fund will help cover such costs. However, it would help if you take note of unexpected expenses and adjust your budget accordingly.
You should always plan for emergencies, but you should never plan for them when you don’t have to. By setting aside extra money each month in case of unforeseen expenses, you can prevent a financial crisis before it happens. If you can plan ahead, you won’t have to stress whether you have enough money to meet an emergency. Emergency funds are there to help you during these times, but you shouldn’t waste them by living luxuriously when you can afford to pay a little more.
A financial Objective that Requires Saving
Do you intend to become a homeowner, start a business, or go for a holiday? It will be absolutely ridiculous to turn to savings devoted to these plans when other emergencies strike. Having an emergency fund will help you in these circumstances.
Living away from the family
Different circumstances may force you to live away from home. For instance, it might be so costly to keep traveling home from work. But what happens when it becomes vital to travel home, maybe to attend to an emergency? A medical fund may salvage the situation.
The Bottom Line
While it is not good to be pessimistic, it is vital to prepare for eventualities and unexpected bills. This article has highlighted at least seven great reasons to have an emergency fund. An emergency fund can help save lives or protect from financial disasters. What if you want to start an investment? Get all the necessary help from Instant Loan.