How to Get Ahead of a Bad Financial Situation
Planning ahead for anything is important. But it’s especially important to plan ahead with your finances. Being financially stable isn’t a destination, but a journey! The first step you should take is to give yourself a safety net.
SET UP AN EMERGENCY FUND
Emergencies can strike at any time and can leave you scrambling to find a solution. This is why an emergency fund is crucial to your financial plan. An emergency fund is a pool of money you set aside for unexpected expenses that give you a bit of a runway when you need it. Whether it’s a sudden medical expense, or a home repair, it’s your emergency fund that can give you something to lean on during a turbulent time.
It’s the type of thing that you won’t need until you really need it. So do yourself a favor and set one up, now!
GIVING YOU FREEDOM
Emergency funds are important for emergencies, but they can also serve you when you want to take a risk. For example, if you want to go all in on an investment property, or start a business, this fund can give you some room should your investment not be successful.
ALLOCATING FUNDS TO YOUR EMERGENCY FUND
The amount you choose to allocate to your emergency fund is different for everyone. Some recommend six-months worth of living expenses, while others say three.The key is to assess what you’re comfortable with and what number gives you a sense of security.
CREATING YOUR EMERGENCY FUND
To create your fund, start by designating a separate savings account just for emergencies. This puts a separation between you and your income. It also removes any temptation to dip into the fun for expenses that aren’t emergencies.
Then, you can set a realistic monthly goal that provides you with financial security and peace of mind.
In an unpredictable world, giving yourself a solid financial foundation is your greatest asset. Emergency funds can be part of that foundation and give you the security and confidence you need.
You should never feel guilty about actually using your emergency fund. You created it for a reason! When an expected expense arises, this is what your fund is for! Just be sure to rebuild it so it’s there for you next time.
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