All That You Need to Know About Emergency Funds
March 26, 2020 | Peyton Sawyer
Emergency Fund is a topic talked about quite often. It is a means to financially handle any unexpected event or emergent situation that occurs in your life. Preparing for anything out of the “norm”, aside from your standard bills is a great way to secure your financial health. Starting a savings fund such as this applies to everyone. Life is unpredictable. You never know what will happen, so whether you are financially secure or living from paycheck to paycheck, it is important to be prepared for the unexpected. That can be anything from a home repair or purchase, getting sick or hurt, or even the loss of a job, which we all know, can be quite devastating, especially if you are already struggling to make ends meet.
Making more than a conscious effort to set aside some money in an emergency fund can make the difference between surviving an emergent situation or not. If you have ever experienced a financial emergency, then you know it can be quite overwhelming, so why make a difficult situation even more difficult by not being prepared. Dealing with an emergency is hard enough without also being stressed with the financial aspects of it. So, how can you prepare? Well, it is important to find out all that you need to know about emergency funds.
What Is an Emergency Fund?
An emergency fund is a separate account from your primary savings account. It should not be used to save for anything other than an emergency. That means it should not be an option when purchasing a new car, taking a vacation, paying tuition, or anything else. Thinking of going on vacation? Or are you planning on covering college tuition for your child, or paying for their wedding? Then starting a vacation fund, college fund, or other is a smarter financial decision then dipping into the funds saved for an emergency situation.
How Much Should Be Saved in Your Emergency Fund?
The size of an emergency fund will vary depending on the person. When determining how much you will need, consider your lifestyle, monthly expenses, income, debt and number of dependents. This will help you to calculate and total your monthly expenses. A good rule of thumb: you should save at least three to six months’ worth of monthly expenses in your emergency fund. That may sound like a lot of money, and you’re right it is, but if you start now, then you are one step closer to reaching your goal. Starting sooner rather than later can help to secure your financial future.
When Should You Use Your Emergency Fund?
Your emergency fund should be used for any unexpected events. That means anything out of the “norm”. It may be a medical expense, a necessary repair, or for monthly bills if you lose your job, or any emergency that threatens your financial well-being. Just be sure to replenish the funds used, so that when another emergency occurs you are not left scrambling for extra cash. If that happens, you may need to consider short-term loans as one of your alternative funding options. With the services available at Texas Car Title and Payday Loan Services, Inc. you can get a Texas title loan with just a few simple requirements.