Job Loss? Emergency Medical Bills? Car Break Down?
Life happens, which is all the more reason to incorporate a rainy day fund for unanticipated events that take place in our lives.
Some financial gurus suggest establishing an emergency fund that is worth $500–$1000 dollars, but the exact dollar number really depends on your needs.
In today’s world $1000 dollars goes QUICK. One car expenditure or medical bill can wipe a $1000 dollar emergency fund clean–SEVERAL TIMES OVER. And a job loss DEFINITELY WON’T be covered by a $1,000 emergency fund.
But the stress that comes with:
Emergency Medical Bills
Random car expenses
Can be mitigated if precautionary actions are taken.
Establish an emergency fund that totals to 3–6 months of your regular monthly living expenses.
If you have 3–6 months of money saved up, you can ensure that most inconveniences that come about can be quickly solved. A 3–6 month emergency fund does not guarantee freedom from unexpected situations, but it most definitely ensures that many of the unexpected situations that do occur are less financially stressful.
ACTION STEP: Decide today what one month of your total living expenses is and multiply that by 3–6. After you do this, work on putting this total amount in a separate (but LIQUID) account that you only touch for emergency situations. If you find this amount of money to be too tempting to not touch, then put this money in an account that is difficult to access.