If you’ve ever found yourself in the middle of an unexpected but difficult financial situation you probably wished you had a nice tidy sum of money set aside to help you out, or if you did then you know just how helpful it was. Having at least 3 – 6 months of your living expenses set aside in case of any sort of trouble is a great way to ensure your financial health, especially coming up to the holiday season. Here are some of the top reasons you really need an emergency fund:
To Keep Your Savings Looking Healthy and Prevent Debt
While having an emergency fund and having savings might seem like the same thing, you need to make sure that you’re keeping them separate as they’re two pools of money that should be used for different things. If you choose to take a spontaneous vacation to somewhere nice, you need to make sure you haven’t used the money from your emergency fund in case something happens when you’re away or when you get back. On the flip side if you’re seriously trying to save for retirement or for your next big purchase then having a separate fund to help you out when something unexpected happens means that you won’t find yourself months behind on your savings goals. An emergency fund also ensures that you won’t have to take on debt because of something you couldn’t plan for.
Less Stress When You’re out of Work
Being between jobs is a stressful situation as you aren’t sure where your income will start coming from next. When trying to focus on the finding the best job for you, having to constantly worry about money can be very distracting. By having some money ready to cover your basic expenses you can spend some quality time really making sure you’re setting yourself up for success in the best situation for your abilities. Additionally, if you or your partner suddenly become seriously ill, you won’t have to worry about not having that income as you’ll know that your living costs are taken care of because of your careful planning.
In Case Anything Goes Wrong with Your Health, Your House, or Your Car
Unexpected, extra bills are a serious problem when trying to ensure that you’ve planned an effective budget. If one day you wake up to a minor flood in your house, or your car has one too many lights lighting up your dashboard then you might find yourself facing a large bill. With rising medical care costs any sort of illness could also see you taking on medical bills that would inhibit your savings. An emergency fund’s goal is to help alleviate this sort of stress and ensure that you can take on anything life throws at you.