Do you have an emergency fund?
What would you do if you suddenly lost your job? Would you be okay for the next month? The next 2 months? How about half a year? Here’s another question: If you suddenly had a medical emergency, and couldn’t work because of that, how long before you run out of money?
Most Canadians are currently living pay cheque to pay cheque; as in, they’re not managing to save up any money towards retirement in old age, or worse yet, towards an emergency fund in the worst-case scenarios. The emergency fund is a simple, yet critically important aspect of your finances, so let’s take a look at how we can set up an emergency fund and how it will help you!
A variety of emergencies
Life is interesting. There are lots of ups, and sometimes, lots of downs. Think of all the emergencies that could possibly result in a loss of income. Now, we understand that thinking about these things is no fun at all, so here are a few situations to get the ball rolling.
First, losing your job is the obvious one. How long do you think it’ll take you to find another job? Hopefully, not too long. However, you really never know, do you? Second, becoming injured, or critically ill to the point where you can’t work is another obvious way to lose your income. How long do you think recovery will take? Again, we have our fingers crossed that it’s not too long. One last situation you might consider is when there are some emergency expenditures, such as fixing your home, or maybe unplanned travels due to a situation in the family. All of these cases will require you to have money set aside.
The importance of the emergency fund
In all the above situations, plus many others, you could run into a lot of trouble if you don’t have money set aside. Can you imagine that scenario? If you have an emergency fund to which you are contributing, it offers you a lot of benefits!
Having an emergency fund will help you reduce stress. As you may know, one of the main causes of stress is money, or more importantly, lack of it. Being prepared with an emergency fund means you’ll be able to deal with whatever life throws your way.
Helps set up good saving habits. It will help you establish a good habit if you regularly contribute some amount of money monthly. It can be any amount but make it consistent! Having that emergency fund there will encourage you to avoid haphazard spending.
Avoid poor and hasty decisions. In desperate times, people may resort to drastic measures. For example, some people might decide to sell off their possessions, such as their car, in order to scrounge up some money. Others may ask around to all their friends to borrow money, which probably isn’t something you find joy in doing.
Have your emergency fund ready to go!
The best time to start saving is yesterday. The second-best time is today. Make it a priority to start saving up for an emergency fund the best you can. In the meantime, if you find that your emergency fund is looking a little empty, there are alternative solutions! For example, to counteract medical issues, you may consider having a disability or critical illness insurance policy. For even more flexibility, you could think about taking out a personal loan, such as one that we offer at FlexFi, which can be used towards anything you want! Happy planning!