Do you have an emergency fund? I hope you do have a significant sum of money set aside in case of an event like a hospital bill or a major expense. It happens to us more often than not, and we would not want to be caught off guard when it happens.
This is one of the reason Singaporeans go into debt. They require a large sum for a certain emergency expense and end up taking a credit advance from the banks or even worse still, illegal money lenders. They ultimately spiral down and as their debts get larger and larger .
A good rule of thumb would be to have an emergency fund of three to six months of your paycheck. It should be placed somewhere out of reach yet easily accessible within three days. The easiest way to do this is to place this money in another bank account different from the one your salary comes in. Its best to not take an ATM card for it so you will not be tempted to spend your emergency funds.
With enough time and discipline, you will be able to amass your emergency funds for those rainy days!
One very important thing that should not be overlooked in terms of personal finance is to save part of income every month. To put in place an effective system of savings, you must know the amount to be saved, duration, destination, and apply a few tricks to avoid having financial difficulty in the cause of an emergency.
The good news is that this delicate situation can be avoided easily with a little organization.
An emergency fund can anticipate the unexpected. Whatever your situation, they will arrive sooner or later in your life. This is mandatory because no one is immune from an accident or breakdown. For example you can lose your job, have to change the engine of your car, or having to pay inheritance tax an inheritance. The precautionary background should be used only to regularize exceptional situations. Do not use it to finance a trip, pay for the education of your child, pay your taxes or fill the fuel tank. The usefulness of this pool of money is paramount. This allows you to be serene in everyday life, not to be in doubt of each expense. However, it is important to build up the nest egg before investing. This is your number one financial priority. You will invest when your emergency reserve will be filled. If you are saving every month, that's fine. If not, act now! There is no time to lose because time is money.
What more can I say to convince you of the importance of setting aside money to brave the storms? Certainly, if you are providing and have patiently built up an emergency fund, your stress level will be much lower when you have to get out of a difficult situation. Having money means having the ability to make choices. Below are various steps to build an emergency fund.
Step 1: Determine your basic expenses
First, make list of your essential expenses; rent or mortgage, taxes, car or public transportation, minimum payments on debt, food, fresh medical, and day care for children. You will know exactly how much money you need to accumulate to support yourself and your family.
Step 2: Open an account for your emergency fund
When you build your emergency fund, choose the type of account for you and then orchestrate automatic transfers from your checking account. Avoid investment accounts such as accounts portfolio, whose yield is determined by market performance. After all, you work hard for the money you earn, and these savings should in turn work for you. Why run the risk that the value of your account has been halved by the time you need it? The money that is in your emergency fund should be accessible at all times and invested in safe financial vehicle.
Step 3: Save a little ... but do it right away!
The amount you save for your emergency fund is irrelevant, what matters is to start now, even if you do not pay $20 per pay. Set yourself for example a $500 target and, when you arrived there, aim for $1,000. Once you open your first and contributions registered account, you'll find ways to invest.
If, for a week you eat out for lunch ($8) and if you offer yourself some coffee or treats ($5), you spend $13 each working day. Try to reduce that amount to $3, at the end of the year you will have saved $2,400. Analyze each item on your budget and try to save at least $100 per month then pour the money in your emergency fund. Every six months, repeat the exercise and try to unearth an additional $10. This way you will ensure financial stability even in times of hardship.
Step 4: Find the money required
If you have started saving say $20, $50 or even $100 per pay to build your emergency fund, Bravo! You are on the right track. Now you need to persevere, your goal is to accumulate enough money to take six months, and you must do so within a reasonable time.
One good way to build up an emergency fund is to analyze your budget and determine a position in which you can reduce your expenses. For example, why would you make not your lunch to work instead of eating out? Then place the money saved in your reserve. We are all able to reduce our expenses. Some reduce their coffee consumption, quit or buy magazines. Others will choose a less expensive TV package. We all have our "vices" and depriving ourselves for a while is not so dramatic.
Step 5: Tell yourself that your emergency fund is sacred
You must tap into your reserves when you are in a situation actually preventing you from meeting your short-term basic needs. If you withdraw money in at any opportunity, you are playing a dangerous game you will be losing. If you think you will not have the discipline to respect the purpose of your emergency fund, you find a way to block access.
This is one of the reason Singaporeans go into debt. They require a large sum for a certain emergency expense and end up taking a credit advance from the banks or even worse still, illegal money lenders. They ultimately spiral down and as their debts get larger and larger .
A good rule of thumb would be to have an emergency fund of three to six months of your paycheck. It should be placed somewhere out of reach yet easily accessible within three days. The easiest way to do this is to place this money in another bank account different from the one your salary comes in. Its best to not take an ATM card for it so you will not be tempted to spend your emergency funds.
With enough time and discipline, you will be able to amass your emergency funds for those rainy days!
One very important thing that should not be overlooked in terms of personal finance is to save part of income every month. To put in place an effective system of savings, you must know the amount to be saved, duration, destination, and apply a few tricks to avoid having financial difficulty in the cause of an emergency.
The good news is that this delicate situation can be avoided easily with a little organization.
An emergency fund can anticipate the unexpected. Whatever your situation, they will arrive sooner or later in your life. This is mandatory because no one is immune from an accident or breakdown. For example you can lose your job, have to change the engine of your car, or having to pay inheritance tax an inheritance. The precautionary background should be used only to regularize exceptional situations. Do not use it to finance a trip, pay for the education of your child, pay your taxes or fill the fuel tank. The usefulness of this pool of money is paramount. This allows you to be serene in everyday life, not to be in doubt of each expense. However, it is important to build up the nest egg before investing. This is your number one financial priority. You will invest when your emergency reserve will be filled. If you are saving every month, that's fine. If not, act now! There is no time to lose because time is money.
What more can I say to convince you of the importance of setting aside money to brave the storms? Certainly, if you are providing and have patiently built up an emergency fund, your stress level will be much lower when you have to get out of a difficult situation. Having money means having the ability to make choices. Below are various steps to build an emergency fund.
Step 1: Determine your basic expenses
First, make list of your essential expenses; rent or mortgage, taxes, car or public transportation, minimum payments on debt, food, fresh medical, and day care for children. You will know exactly how much money you need to accumulate to support yourself and your family.
Step 2: Open an account for your emergency fund
When you build your emergency fund, choose the type of account for you and then orchestrate automatic transfers from your checking account. Avoid investment accounts such as accounts portfolio, whose yield is determined by market performance. After all, you work hard for the money you earn, and these savings should in turn work for you. Why run the risk that the value of your account has been halved by the time you need it? The money that is in your emergency fund should be accessible at all times and invested in safe financial vehicle.
Step 3: Save a little ... but do it right away!
The amount you save for your emergency fund is irrelevant, what matters is to start now, even if you do not pay $20 per pay. Set yourself for example a $500 target and, when you arrived there, aim for $1,000. Once you open your first and contributions registered account, you'll find ways to invest.
If, for a week you eat out for lunch ($8) and if you offer yourself some coffee or treats ($5), you spend $13 each working day. Try to reduce that amount to $3, at the end of the year you will have saved $2,400. Analyze each item on your budget and try to save at least $100 per month then pour the money in your emergency fund. Every six months, repeat the exercise and try to unearth an additional $10. This way you will ensure financial stability even in times of hardship.
Step 4: Find the money required
If you have started saving say $20, $50 or even $100 per pay to build your emergency fund, Bravo! You are on the right track. Now you need to persevere, your goal is to accumulate enough money to take six months, and you must do so within a reasonable time.
One good way to build up an emergency fund is to analyze your budget and determine a position in which you can reduce your expenses. For example, why would you make not your lunch to work instead of eating out? Then place the money saved in your reserve. We are all able to reduce our expenses. Some reduce their coffee consumption, quit or buy magazines. Others will choose a less expensive TV package. We all have our "vices" and depriving ourselves for a while is not so dramatic.
Step 5: Tell yourself that your emergency fund is sacred
You must tap into your reserves when you are in a situation actually preventing you from meeting your short-term basic needs. If you withdraw money in at any opportunity, you are playing a dangerous game you will be losing. If you think you will not have the discipline to respect the purpose of your emergency fund, you find a way to block access.