The top 3 reasons you MUST have an emergency fund.
Disclaimer: In the name of full transparency, please be aware that this blog post contains affiliate links and any purchases made through such links will result in a small commission for me (at no extra cost for you). As an Amazon Associate I earn from qualifying purchases. I am not a finance expert. Anything written here are just personal experiences and my own opinions.
We have all experienced it, an unexpected expense, but what if you are ready for it? What if when that doctor bill from a month ago hits your account, the washing machine unexpectedly dies, or your car needs new breaks, you don’t have to panic and figure out where you are going to get the money? Well, if you have an emergency fund, you won’t.
What is an emergency fund?
First off, you may be asking, what is an emergency fund? An emergency fund is a stash of money you keep separate from your day-to-day spending and is only to be used for unbudgeted expenses. If you want to see how I separate my accounts to help budget, take a look at this post!
Top 3 reasons to have a rainy-day fund
- The most important reason is so that you don’t go into debt.
- Having money saved up will allow you not to have to max out your credit card to pay for those annoying fees that pop up outside of your monthly budget. On a side note, if you are looking for a great rewards credit card, I recommend the Discover IT card. I have had it for years and make money each month just for using it! Please don’t fall into the trap of not paying it off at the end of the month though. That is a recipe for disaster.
- Secondly, it gives you peace of mind
- When you know that you have the money to cover those random unbudgeted expenses, you don’t have to stay up at night worrying about all the what ifs.
- Lastly, it sets you up for financial success.
- If you have an emergency fund for these unexpected expenses, it will keep you from dipping into your savings. You never want to touch your savings account if you can avoid it. Keep that money for a house or retirement. The more you can use your rainy-day fund instead of your savings, the more money you will keep in your pocket for all your financial goals!
That’s great, but how do I build up this money?
You are probably thinking, ok Jackie, yeah that sounds great, but how am I supposed to do that with everything else I have to save for?
I am not saying that saving is always easy, but the benefits speak for themselves. They are in my opinion, worth the sacrifice needed to get there. To start an emergency fund, I would recommend just putting aside $20. Don’t buy that new top. Make lunch at home instead of running out and grabbing something, use that money to help build your safety net. Over time if you have those little bits of extra cash add them to your stockpile. If you are in a position to do so, set aside a specific amount in your monthly budget to put in your fund. Once you reach $1-2K, start putting that allotment into a larger savings account.
I know you can do it if you put your mind to it, and sooner than you know it you will have that peace of mind in your bank account and sleep a little easier. Take control of your finances and start living your best life!
If you would like some more budgeting tips, check out some more posts here.