Specialists recommend setting aside a sum equivalent to three to six months of your daily expenses to cover unexpected crises. The greater your savings, the more protected you feel in unexpected situations.
My spouse and I, however, don’t have a specific emergency fund. Sounds awful, isn’t it?
Interestingly, we’ve amassed a sizeable sum for a house down payment and have used it as a dual emergency fund/down payment in the interim.
We also maintain a minimal $1,000 contingency fund for unexpected situations such as sudden repairs, tickets, bills, or our car insurance deductibles.
Easy access to this $1k has been assured as it is kept in a savings account linked to our checking account making transfers instantaneous.
Whether it’s unpredictable day or a protracted crisis, readiness is key.
Many feel swamped by the magnitude they need to save. Still, it’s worth noting that patience typically pays off in the end.
Here’s a peek at how we became comfortable with our contingency plan.
Start Small with Your Goals
The thought of saving up to six months of living costs feels daunting. However, remember that Rome wasn’t built overnight, and even saving $5 daily translates to an average of $150 monthly. While it may seem impossible to save such amounts, with dedication, it is achievable.
Aim to save as best you can, continually contribute, and don’t lose hope. Over time, you’ll realize your goal and experience the satisfaction of achieving your first significant saving milestone.
You Can Make Do With Less
Your current monthly expenditure may not be the same in a dire situation. For instance, in cases of job loss, you switch to survival mode, minimizing inessential expenses like eating out or buying new clothes.
When calculating your required savings, consider your essential costs such as rents, bills, groceries, and health insurance. Also note, you can rely on unemployment benefits supplementing your savings, generally a percentage of your usual salary.
Other Funding Options
Lastly, in severe emergencies, also bear in mind to rely on your liquid and non-liquid assets. What could you sell to weather tough times?
While delving into your retirement savings isn’t ideal, keep in mind that if worse comes to worst, you still have those funds to fall upon, and hopefully, it never has to come to that point.
All these considerations should underscore the importance of robust savings planning!
