Financial emergencies can come in many different forms. You could lose your job, lose your health, your basement can flood, the transmission can fall out of your car or something else that you’ve never planned for.
The best way to plan for an emergency is to establish an emergency fund. This will give you the funds you need to deal with life’s unexpected hurdles. By having an emergency fund, you won’t have to turn to credit cards or loans to deal with emergencies.
You should try to have an emergency fund that has about 6 months of your minimum monthly expenses. While saving this much may seem overwhelming, you can start by saving as little as $10 per month. It doesn’t matter how long it takes to establish an emergency fund, as long as you get started.
Make sure that you will have easy access to your money when you need it. It might seem attractive to put your money into investments but, depending on how it is invested, you might not be able to access it on short notice without paying a large penalty. You should speak with your banker about the best way to keep your emergency fund.
If you need assistance working emergency savings into your budget, we are pleased to offer free consultations.
Jean Goguen, CPA, CMA, CIRP, Licensed Insolvency Trustee
Licensed Insolvency Trustees
Fresh start…the road to financial freedom