The world is currently experiencing uncertain times. With the ever-rising cost of living, you may often struggle to cover all your expenses. An unexpected financial emergency may have you worried or scared. However, it is not all doom and gloom. With an emergency fund, you can rest assured that no financial expense will find you unprepared.
A dedicated emergency fund or savings account is a sure way to insulate yourself and is the first step towards financial liberation. Setting some money aside for a rainy day allows you to be ready when the rain pours and gives you a stepping stone to recover after the financial emergency has been surmounted.
Ailments, car or home repairs, sudden income loss, or accidents are some of the events that may sneak up on you. An emergency fund is a reserve of money set aside for unplanned expenditures.
Unplanned expenditure includes all expenses that were not planned for in your monthly budget, albeit an emergency. Emergency funds help prevent you from falling into debt when facing challenging moments. Contrary to popular belief, an emergency fund is not the preserve of the wealthy but is instead a practice for all adults with an income source.
Setting Up an Emergency Fund
Saving is an influential culture. Your savings partner should encourage you to reach your savings goals and support your monthly journey. It is possible to save money on autopilot in the current digital dispensation. Financial experts from SoFi encourage you to save separately for every financial objective and enable you to make automatic savings by keeping your money safely in saving vaults.
Whereas there may be numerous challenges when it comes to setting aside a portion of your income, financial strategies that may be of value include:
Having a Consistent Contribution
Consistency is the fastest way to create a habit. Automatic savings using an automatic recurring periodic transfer is the easiest way to create a saving habit. The transfer period would vary depending on your revenue stream, such that a weekly earner would set weekly goals or daily goals for daily income.
Monitoring your Progress
Constantly monitoring your progress allows you to appreciate your savings growth and gives you a reason to celebrate each milestone in your savings journey.
The Uses of an Emergency Fund
When Your Income Source is Uncertain
An emergency fund can save you numerous financial headaches if your income source is uncertain or you only have one revenue stream. When in-between jobs or when thinking of starting a new phase of life, like starting a family or going back to school, an emergency fund acts as a buffer to insulate you from financial distress.
For a Homeowner
Whereas paying off your mortgage is a significant milestone, repairs and maintenance can also be expensive for any homeowner. Whereas a sinking fund allows you to save up for major repairs, an emergency fund helps you plan for more minor, more urgent needs such as plumbing or electrical repairs when the need arises.
Saving is a vital step in maintaining financial liberation. A savings partner should provide a cheap and efficient way to save automatically without any hitches. Contact SoFi today to start your savings journey.