Life can often be unpredictable and certain things are beyond our control. Being financially prepared for unforeseen instances such as illness, loss of employment, repair work; is the first step to being financially smart. Even before you start investing money, you need to have your emergency fund in place.
Whether you are an expat or not, having an emergency fund in place is very crucial for you and your family. It prepares you for an uncertain tomorrow and helps you live a stress-free today. Here are some simple steps to get started with your own emergency fund.
- Make a decision on how much you are going to save. The best way to do this is by calculating your total monthly expenses and multiplying by six. 6-12 months of expenses is an ideal emergency fund.
- Set a goal for yourself. Think of how much you would want to save in a specified time. Your goal should be clear and doable.
- Start with making small changes in your lifestyle. Start eating at home more often and avoid eating out.
- Start saving now ! Discipline is key to saving money; so start by saving small amounts and then move to bigger savings.
- Maintain a separate bank account for your emergency fund. Make sure you have 24X7 access to the money in the account; but do not spend this money on non-emergency expenses.
- Sell the stuff that you don’t need and direct the proceeds to your emergency fund.
- Invest in low risk products. This is a great way to boost your emergency fund. However, do this once you have some knowledge about investing.
Setting up an emergency fund means you are prepared for the unknown and courageous enough to face the future. Building an emergency fund may seem challenging in the beginning; but with time and some discipline, it becomes a habit. It’s not yet late, go start now and be prepared for an uncertain tomorrow.