Should we really talk about why you need an emergency fund or if you still need one? Yes, you do. There’s no question about it. A good emergency fund should be able to cover your expenses for three to six months. This fund is intended to be used during an unexpected financial blow such as losing employment, death in the family, or medical expenses. It is designed to keep you from falling into debt.
Usually, people get stressed by the thought of spending on house repairs and gutter cleaning in Seattle, Washington. Home repairs are costly and can go up to tens of thousands of dollars. But what will you do if your roof caves in or your septic tank bursts? You’ll have to dip your hands into your emergency fund and address the issue as soon as possible.
You’re Paying Debts
If you’re finishing paying off a debt, you need an emergency fund in the event that you have to spend on things that are not in your budget such as car repairs and medical costs. Technically, you should have an emergency fund ready before you apply for a loan. Without an emergency fund, you’re only going to get into more debt when you have to pay for unexpected expenses.
When You Have One Source of Income
What’s the scariest part about being an employee? You may have a steady source of income, but what will happen if you’re suddenly laid off or if the company shuts down? You lose that steady stream of income. You need an emergency fund for that. It will keep you afloat through an unexpected job loss or illness. This is especially important if you are your family’s breadwinner or you’re a single parent.
Being self-employed is confidence-building. It makes you feel good to be able to work on your terms. But it comes with its consequences. You don’t have job security. You don’t have benefits. You’re not entitled to employer-sponsored insurance policies. And when you don’t have clients or projects, your earning potential drops to zero.
You’re Responsible for the Repairs in Your Home
The one good thing about renting an apartment is that you don’t have to worry about repairs around the house. But if you’re a homeowner, you’re responsible for the costs of maintaining and repairing your house. You have to set aside a fund for that because you never know when the plumbing system will have issues or whatever else that goes wrong in a house. Home repairs are expensive. Even cleaning the air conditioner and furnace costs hundreds of dollars. Plan ahead so that you’re ready for these kinds of expenses.
Your Family Has Medical Issues
There’s nothing like medical issues to drain your savings. Even your comprehensive health insurance policy will have only limited coverage when it comes to medical bills. If your family has a history of medical issues such as cancer, hypertension, and heart diseases, it’s best to be proactive and prepare for any eventualities. Medical issues are expensive. Your emergency fund can serve as a buffer, giving you enough time to find financial sources.
You lose nothing by having an emergency fund, so why won’t you have one? This is one of the smartest investments you could get into. You’re protecting your future against the uncertainties of the times.