Greetings, First of all !
Let’s know why Emergency Fund is so necessary and talked a lot by Personal Finance Experts.
I would start our discussion by saying a much heard line about Personl Finance,
“Personal Finance is more personal than Finance”
This mere line carries a lot of messages. First, let’s discuss, the definition of EMERGENCY FUNDS. As the knowing the correct definition solves 30% to 40% of or doubts.
What are EMERGENCY FUNDS ?
The funds that are saved and set aside (in a savings account or Highly Liquid Treasury Bills) for Emergency Purpose only.
Ex – Sudden tyre burst of ou car, job loss, etc.
Why to have Emergency Funds?
After consulting a lot with our Advisor, we come with a plan to invest certain amount of our money for our Goals & started an SIP and rest of the amount for our expenses, expenditures,etc. It basically means, there is no money left to cater for any unplanned emergency that must be taken care of immediately.
And we can’t even deny the fact that, we will face no Emergency in our life. As somebody said,
Uncertainty is the only certainty in one’s life
The purpose :-
We have Emergency Fund so that we need not to hamper our running SIPs for our future goals. We want our goals to complete in time and we want the sense of security as well for that we must have EMERGENCY FUNDS.
What should not be practiced ?
- “I will start collecting money for Emergency funds from next time.”
2.”Let’s Invest this idle money which is kept as Emergency, No Emergency came in last three years”
3.”I have job security so I don’t need one””
4.”I am young and healthy, Why should I have an EMERGENCY FUND?”
5.” I will start collecting once boss gives me increment”
Avoid having such lame excuses and start collecting Emergecny Fund first and other things like Investing for Goals later.
How much to have as an Emergency Funds?
Well, this totally depends on individual’s Profile. But, I will try to figure out some figures around it.
The standard rule of thumb is to save 3 to 6 months’ worth of living expenses.
Your amount depends on your personal Profile, but let’s have some general figures :
3 Months: Best if you have a highly stable job, a steady dual-income , or no dependents.
6 Months: Ideal if you are a single-income household, have kids, & work.
9 to 12 Months: Smart if you are a freelancer, a business owner, or have variable income & Uncertain Job profile.
Conclusion:-
Emergency Funds are building blocks of our Investing Journey and should not be overlooked. but How much to have is calculated in individual’s own capacity. Remember that the key to financial success is patience, discipline, and continuous learning. Do not hesitate to meet Financial advisor, in case you think you need one.
Let’s know in the comment section, if you need to clarify your doubts, Further you can contact us by visiting our ABOUT US page in MAIN MENU. Or Simply chat us by clicking on whatsapp icon given below.
#Happy Investing
by meriSIP.com team.
