Emergency fund is a safety net which helps you move on with life when hit by life’s unforeseen events.
It could be anything – unemployment, unexpected medical contingencies, and repairs to your house or vehicle. So, irrespective of your profession and income, emergency fund is a must. Because uncertainties apply to all.
One must have excess fund for at least 3 to 6 months or a year and it should be adequate enough for the monthly lifestyle expenses of a family.
To have an emergency fund , one must identify the monthly expenses, asses your job and salary and keep contributing to the emergency fund on a regular basis.
Wondering how to find this excess money so that you can create one?
Let us discuss a few points.
- Find Unnecessary Expenses and Stop
Strike off the unnecessary expenses like visiting restaurants and multiple subscriptions and reduce bad habits like smoking and consuming alcohol. Identify the money leakages and stop them.
- Do Online Job
Use your additional skills to find online jobs which adds to the income. Job losses and pay cuts are making rounds. So, polish your skills which might fetch you another job or add value to your resume.
- Automate Emergency Fund Investments
Once you identify the funds to be raised, automate the emergency fund account. This is much easier than contributing to it manually.
- Use Liquid Fund over Savings Account
Move your funds in the savings account into liquefied mutual funds which fetches higher rate of interest. This interest is additional income which adds to the emergency fund. You can automate this account too. Liquefied mutual funds can be withdrawn immediately with some even having ATM cards.
- Sell Unused Items
Sell those household items that are not in use. For instance, if you have furniture which remains unused, they can be sold in websites like OLX. This too adds to the emergency fund.
- Renegotiate Loan Interest
Check whether the rates you pay for the loans are higher. If yes, correct them and try restructuring the loan. This helps to reduce your EMI and thus realign the interest. This saved money can be added to the emergency fund.
Tough times are ahead as businesses keep losing their revenue and as people face unemployment. So, secure yourself with an emergency fund so that you are not left to run from door to door for money.