An emergency fund is an account where your emergency money goes to. Considered as a collective term of emergency money stacked and compiled together, it is important to start building up your emergency fund for long-term purposes and most importantly, for short-term circumstances as well.
Growing an emergency fund can be a challenge for some especially for fresh graduates and starting employees. However with hard work and knowledge of good financial management, one can start planting and investing your own short-term investment loans together. Once planted, it can slowly grow through time if well-watered and taken care of. In other words, you must consistently invest your own money to save it for emergency purposes.
What is considered a real emergency?
A real emergency requires immediate responsive action for urgency and abrupt solution to the current problem. Examples of real emergencies are health care emergencies in which a family member can be sick and is need of proper and urgent medical attention and payment. Another real emergency is a natural disaster or calamity is happening. It might be a typhoon, earthquake, or the worst, fire related emergencies.
Not only that, real emergencies also include household, automobile, and livelihood emergency. Broken furniture must be repaired to avoid accidents, your car must be repaired for your daily transportation to be maintained, and your livestock business is in need of an extra capital for their food.
What is an Emergency money?
Emergency money can be a short-term loan or saving depending on the individual on how to build up to their emergency fund. Most people build up their emergency money by saving up step by step through short-term loans.
Fitted for real emergencies, an emergency money is one useful card and easy to go to money in case real trouble will happen ahead. Tips by experts on how to save up for an emergency fund and maintain a good financial situation are stated for your own convenience.
Avoid financial debt and damage
Life often knocks us out with the unknown- from a sudden medical expenditure to broken household furniture and appliance. A smart and responsible individual is proactive regarding these situations and will do his/her best to avoid financial wreckage or being broke.
Segregate your finances and determine how much your fund is
Properly budget and break down your personal income and expenses, leaving a desired percentage of your own salary. Your desired percentage can serve as your emergency money. Step-by-step, every payday, you can gather out that amount of money. In time, it will grow and sustain leaving you at peace whenever an emergency situation will happen.
Focus on what you need rather than what you want
Basic tip for personal finance management is to pay more attention to what you need to survive as an individual. If marketing companies bombard your TV with advertisements to get that latest Smartphone model, ignore it and turn off that TV if your current phone is still working and fully-functional. You don’t need that latest gadget so why will you purchase it. It is much better and practical to save up that little amount of money for emergency purposes.
What individuals need should be a priority. Basic need of independent individuals for survival is food, shelter, water, electricity and transportation fees. Focus more on what you need and later on, what you want.
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