Whether you are an employee working for an organisation or an entrepreneur running his own business, having an emergency fund is something that is crucial for all. It can be considered as the key element to reach financial independence so that you are prepared to handle any challenges that life throws at you. No matter how good or bad you with your financial management skills, there is nothing you can do in order to prevent a financial crisis that is something inevitable.
Still, you can be prepared in advance so that if such a situation arrives, then you are ready to handle it without any complications. And this is where; an emergency fund comes into play which actually helps you stay afloat even during the rough patches of your life. Now, building an emergency fund is not that easy than it may sound. Here, in this blog, we have discussed how to build an emergency fund that can help you survive any financial disasters. So, let us get started.
Rule number:-1 Define your goal
The first thing that you need to do is define the goals that you want to achieve by keeping an emergency fund. Just recalling the words “I need to save” is not to help alone. You have to make a realistic approach and evaluate how much exactly you need to save for your emergency fund. After that, you will get a clear idea where you stand right now and what you need to do in order to reach the goal that you have set.
Rule number 2:- don’t ignore your debts
Yes, your primary goal is to save money, but that doesn’t mean that you should forget about your bills and debts and just focus on stuffing your saving account. Well, doing this will not lead you anywhere because in the end, you are inviting financial crisis by yourself. Thus, your best strategy should be clearing your debt and saving side by side together. If you are still left with some debts, then you can take the help of the direct lender who offers bad credit loans at an instant decision in Ireland.
Rule number 3:- Investment really helps
Well, you cannot certainly build an emergency fund just by saving your income and keeping it in the bank account. If you are planning to save a big amount, then you need to invest as it can help you multiply your savings at a fast rate. You could invest in the stock market, real estate or even go with cryptocurrency. Whatever platform you choose, make sure that you have the right knowledge and you go only with them if you are ready to take the risks that come with it. The main point here is that you need to find a way to grow your money.
Rule number 4:- Avoid tempting spending habits
Well, when you are in a saving mission, then you need to control your urge of tempting shopping which comes out of the blue. Indulging oneself in overspending habits is one of the biggest reasons why people get stuck with credit card debt whose interest get accrued if you keep delaying. Thus, till you reach your financial goals, make sure that you don’t spend too much.
Rule number 5:- keeping 3 to 6 months of total income is ideal
Having an emergency fund provides you with a sense of security that whatever happens, you will be capable enough to handle it. Saving around 3 to 6 months of your total income in your emergency fund will be ideal so that if any financial crisis comes, you are ready.
So, these were the rules that you need to keep in mind while creating an emergency fund, so that you are financially ready to tackle any challenges that life throws at you.