Most of us have got a savings account, in which we have saved some amount of money that we can use in case of an emergency such as hospital bill, car repair, house repair, death in family etc. Basically, that amount we have saved will help us in either one emergency or another.
The question is, how far would your savings take you in case you lost your job? Or became ill and cannot work? Or if your spouse lost their job or became sick and suddenly you are the only source of income? Would your savings carry until you or your spouse found a job? What if a disaster such as flooding and you totally lost your assets, or fire razes down all that you have, would your emergency fund bail you out?
Even though, we would not like to be in these situations, it is important to be well prepared, just in case something happens. As a start, here are the four major expenses that your emergency fund should be able to cover in those lean times.
1) Household Related Expenses:
Your fund should be able to cover for your rent/mortgage, food, house shopping and house utilities.
2) Debt Expenses:
If you have any monies that you owe a person, bank, financial institution, it is imperative that you have enough saved up to continue with your monthly payments. Most of these institutions will not listen to you stories of disaster or the need to postpone your payments up till a time when you can afford to make them.
3) Transport Expenses:
During the good times, we never realize how much we spend on gas (fuel) for your car, car repair and maintenance or on bus fare. Until that time when every penny is important do you notice that it actually costs a lot more and is a major expense. You need to be mobile enough as you look for an alternative to your dire income situation.
4) Healthcare Expenses:
You do not want to be in a situation in which, you are sick, or your loved one is sick but you cannot afford to take them to a hospital because you do not have money, and are not even sure when the next paycheck will come in.
Do sit down and add up all these expenses and see how much it is, compare with the savings you have, and see if you are on target or you need to pull up your socks on this