5 Important Points to Consider when Saving for Emergencies

Emergency Fund

5 Important Points to Consider when Saving for Emergencies

Emergencies have a tendency to hit us like a bolt from the (proverbial) blue and they are unheralded as they are unexpected. This is why we should always have a contingency plan in place for such unforeseen eventualities.  There are certain steps we may take to ensure that we are never caught ‘wanting’ just when our need is dire.

1.     You must have an element of (financial) balance in life

Saving can be defined as “Putting aside some money for utilizing that amount later”. It is always important to save at least a small part of your monthly earnings for the proverbial ‘rainy day’. If it is not possible to save hefty amounts at once, then try to save at least ten to fifteen percent of your salary/income day in day out. However, it is imperative that the amount saved is done so with absolute consistency. Even if you manage to save up to only fifteen percent of your total earning every month without using your original savings, (thus defeating the purpose of the whole exercise) then within a short period of time you would be able to accumulate a fairly big amount of money that you may then be able to use for any eventuality.

2.     Always keep a strict watch over your spending habits

It is important that you keep a strict eye on your overall spending habits and pre-planned budget for your weekly, monthly and even yearly expenses.  The weekly and monthly budget would be for day to day needs while the yearly budget would account for any big expenses you have in mind. A portion of your budget must be dedicated to ‘contingency planning’ and moreover, this budget must be rigidly followed so that you are well placed to take care of any pressing need that may arise.

3.     Expenditure Journal

You should keep a monthly expenditure journal so as to be able to understand your own spending patterns for the duration of the month and how best to manage your budget.

 

 

4.     Don’t try to keep up with the Joneses

Thanks to runaway consumer spending, we tend to copy others more well off then us irrespective of our monetary stability (Or lack of it thereof). If your best friend has just purchased the latest model smart phone, then let it be. It should not be a motivating force for you to set about acquiring one on your own if you cannot afford it. Remember, in case of an emergency you would not be able to sell that smart phone at its original cost but may well end up recovering only a small part of your initial outlay.

5.     Understand the gap between dreams and reality

It is always sensible to understand your own financial limitations. Remember dreams are unending and they have tendency of being markedly bigger than our incomes. Trying to fulfill each and every dream would inevitably mean a lifetime of being indebted to others and in effect being helpless in case of any financial emergency.

 

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