Do you find yourself living from paycheck to paycheck? If your bills eat up your income every month, an unexpectedly high expense such as medical costs or a car repair could spell disaster. Having an emergency fund will ensure you have the money you need should a crisis arise.
Think about cutting back on some unnecessary expenses and setting that money aside in an account you never touch except for a genuine disaster so you’re not tempted to take out another loan. While loans are crucial for larger items and can be obtained by reaching out to MaxLend and other lending institutions, it’s wiser to have an emergency fund for the small disasters that are inevitable in life. Here’s how to build one.
1. You’re Self Employed
Owning your own business is a great way to build wealth, but it also means you don’t have a steady paycheck especially when you’re starting out. During those crucial early years, the income you receive from that business tends to be either feast or famine, and it’s wise to set aside money for those months when your revenues are lean.
2. You Have Poor Health
If you live with a chronic disease such as diabetes, you’re likely to face unexpected medical bills and hospitalizations. Even if you have health insurance, you’ll have an annual deductible you have to pay. You’ll also have time off from work that might not be covered by sick leave. Having a well-supplied emergency fund will help you face such events with confidence.
3. You Rely on One Income
If you are married with children and you rely on one income each month, it’s wise to have some money in reserve in case you’re laid off. If you lose your job, it may be a couple of months before you can find a new position. Having savings will help you buy food and pay your monthly rent or mortgage. It’s a way to make sure your family life remains stable in a time of crisis.
4. You’re Trying To Get Debt Free
Becoming debt-free is a great way to have financial stability and the flexibility to pursue another career or even retire should you choose. If an emergency arises, however, and you don’t have any money in reserve, you’ll be forced to take on another debt. With a multitude of bills comes increased interest payments, meaning you’ll be further from your dream of financial freedom. Protect yourself by setting aside money in an emergency fund.
5. You’re a Homeowner
Being a homeowner is a great step toward financial freedom. Once that house is paid off, you have a place where you can live mortgage free for the rest of your life. But with that asset comes responsibility.
When the toilet backs up or the washing machine stops working, it will be up to you to hire a repairman to get these things fixed. Having some money stashed away in an emergency fund will help you face those issues with confidence.
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