Why You Need An Emergency Fund

Why you need an emergency fund

75% of Americans live paycheck to paycheck.

Are you living paycheck to paycheck? According to the statement above, 7 in every 10 houses in your neighborhood is one emergency away from a crisis. That’s a huge deal! Many families are torn apart because of financial troubles and I refuse to allow that you happen to you! That’s why you need an emergency fund.

Q: What is an emergency fund?

A: An emergency fund is money that can be accessed quickly in case of an emergency.

Before we continue, take a look at the following statistics for Americans:

  • 71% do not have enough money on hand to cover 6 month’s living expenses.
  • 46% do not pay their bills on time.
  • 48% spend as much as they make or more each month.
  • 12% do not contribute monthly to a savings account or any type of retirement account.
  • 11% have credit card debt in excess of $5,000.
  • 12% have student loan debt in excess of $20,000.
  • The average American doesn’t have more than $400 in savings. [1]

If the average American doesn’t have more than $400 in savings and 75% are living paycheck to paycheck, what happens when an emergency happens? Consider the following scenarios:

  1. The car breaks down and the repair is going to cost $3,000 to fix.
  2. A child outgrows all their clothing and needs a new wardrobe.
  3. The washer and dryer break at the same time.
  4. A company ‘downsizes’ and now you’re unemployed.

Homeowners are more susceptible to financial emergencies and will have to cover these kinds of things also:

  1. The stove breaks.
  2. The house gets infested with critters and an exterminator is needed.
  3. A pipe bursts.
  4. The roof goes bad and needs to be replaced.
  5. There’s a fire.

Although all of these are horrible and completely suck, I want you to realize that worse things can happen to cause financial devastation.

  1. A family member dies and doesn’t have life insurance for a funeral.
  2. An immediate family member gets diagnosed with a chronical illness and doesn’t have health insurance. Or the health insurance won’t cover the amount for medicine.
  3. A spouse passes away leaving behind a single parent with children.
  4. A spouse suffers an injury and is now disabled. The can no longer work and need frequent medical attention.

As heartbreaking as these things are, they happen every day around the world. That’s why you need an emergency fund. It’s protection for you and your family from things that happen in life. Think of it as the tires on your car: They’re the only things protecting you and your family from the pavement.

Emergencies

What You Can Do

First things first, you need to determine how much money you’ll need in your emergency fund. An ideal amount is anywhere between 3-6 months of expenses. This means you’ll have to sit down and figure out how much money you spend in a month on necessities. These things include:

  • rent or mortgage
  • property taxes
  • utilities
  • groceries
  • transportation
  • all bills

Once you’ve figured out that number, then you’ll be able to figure out how much you need for emergencies. If you’re spending $1,500 a month on necessities and only want to save 3 months worth, you’ll need $4,500.

My family decided that our number for our emergency fund is $7,000.

Remember, you need enough money that will cover an emergency. If you become unemployed, you need enough money to pay the bills and feed your family until you find another source of income.

What an emergency fund can do for you.

Not only can an emergency fund help you financially, but it will help you in every other way possible. Think about it. What would it feel like if a problem arose and you had the means to just pay it off without losing sleep over it?

What would be a full-blown crisis to someone else would only be an inconvenience to you. How much comfort and security would that bring you? And just because my family’s number is $7,000, that means nothing for you. You can save $20,000 if that’s what makes you feel secure.

Not only that, but you’ll never be truly broke if you have money saved up. Sure, you may not have spending money at the moment. However, you will have money if someone came up and that’s more important!

Think about the feeling of satisfaction you’ll feel by achieving such a great goal. You can be part of the 25% of Americans who aren’t living paycheck to paycheck! By being diligent and saving money, you’ll be less likely to spend money on minor things that won’t lead to true happiness and are only eating away at your wallet.

But I gotta say, one of the very best things about having an efund is the cushion! If an emergency arises, there will be no marital fights about it. You can improve your relationship by preparing for life’s hardships because they will come. Instead of losing your marriage over it, conquer this problem and show life who’s boss.

If anyone can do it, it’s you! Are you ready to build your emergency fund? Check out these 5 Ways To Build Your Emergency Fund FAST!

References:

  1. https://www.apnews.com/e448304828c44297a392642816064935

What is an emergency fund and do you need one? Yes! You absolutely do need an emergency fund! Find out why by clicking the picture!

Thanks for sharing!

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