How much reserve money you really need right now?
In this episode I’ll discuss the importance of an emergency fund and how much you really need as a savings goal right now.
Why Have An Emergency Fund?
We all know we should have some emergency funds to help us through those unforeseen emergencies in life. You know what I’m talking about: your car won’t start, your computer crashes, you get the flu, your water heater quits working. Or what about the granddaddy financial emergency of them all — you lose your job or business income?
Many people don’t think about the financial “what-ifs?” in life. They happily trot along until some large expense or crisis really throws them. That’s when you want a nice soft cash cushion to land on. The alternative for many is to pull out a credit card and make charges that they really can’t afford.
Definition of Emergency
Emergency funds should be tapped only for real emergencies. Even though it may feel like it at times, taking a vacation is not an emergency! Buying presents, extra clothes, computer games and the like are not emergencies either. The purpose of emergency funds is to keep you healthy and safe during times of unemployment or other unexpected crisis situations.
Eliminate Financial Stress
The solution to dealing responsibly with unplanned expenses is to save up an adequate cash reserve fund. It should be very liquid so you can access it immediately. Having enough money at your fingertips for emergencies shouldn’t be thought of as a luxury; it should be your top financial objective. The stress you can eliminate by having a healthy reserve fund is truly amazing!