Emergency Funds: How to Prepare for the UnexpectedSubmitted by Stone House Investment Management, LLC on September 6th, 2017
The old saying ‘failing to prepare is preparing to fail’ comes to mind when thinking about the importance of an emergency fund. It’s not necessarily top of mind when payday arrives, however contributing to your emergency fund should feel as urgent as paying off monthly bills. In times where the future may not feel as certain as it once was, we help all of our clients prepare for the unexpected.
Instead of purchasing a bunker and preaching the end is near to your entire social media following, prepare for uncertainty by setting up an emergency fund. What is an emergency fund? An emergency fund can carry a different meaning to each one of us. Generally, having a separate fund for emergencies would allow you to have resources should you our family experience a personal financial dilemma or hardship, such as the loss of a job, a debilitating illness, or a major expense. The purpose of the fund is to improve your financial security by creating a safety net of funds that can be used to cover emergency expenses, as well as reduce the need to draw from high interest debt options, such as credit cards or unsecured loans.
So how much should you contribute to your emergency fund?
As daunting as it might seem, it’s recommended that you save 3-6 months of living expenses in your emergency fund. In the age of the internet, many financial institutions have calculators available to estimate the amount you should keep. When you meet with a member of our team, we will work with you to figure out your financial needs should an emergency occur, and put a strategy in place that would allow you to cover your expenses.
If you’re at the beginning of your journey to creating an emergency fund, where should you start? Set monthly goals and stick to them as much you can. Cut back on things that could be considered luxuries, and remember that one day you might be thankful your emergency fund exists. Once you start to build your rainy day fund, it’s critical to remember what an emergency really is. It's not a vacation, a new wardrobe, or even a new television. It truly needs to be allocated to emergencies.
Take the first step toward your financial future.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2017 Advisor Websites.