Another year has come and gone. For some, it’s been magical, and for others, a little less so. The new year is a time for retrospection, to look back at what’s happened, evaluate where we are, and make preparations for the coming year.
Let us offer you one piece of advice – a few simple steps can give you a whole lot of peace of mind when it comes to securing your financial future. Make 2019 the year that you prepare for unforeseen financial challenges with an emergency fund. The security you’ll feel when you know you’ve protected yourself from an urgent home or car repair, a “blip” in your employment, or any one of a million other unforeseen circumstances is one of the best goals to attain.
How Much is Enough?
The amount of money you need in your emergency fund is really up to you. We’d say, the more the better, but in the end you’ll have to make your own decisions. How much will get you over a rough patch – a month’s salary? Six month’s salary? A thousand dollars? Ten thousand dollars? It’s unpleasant to imagine all of the bad things that can happen to your finances, but it’s important to determine a worst-case scenario to help you set a savings goal.
What if You Don’t Have Extra Money?
There’s really no such thing as “extra” money. But an emergency fund is important, so try to prioritize it. You don’t have to put the whole amount away right now, but the key is consistency. Keep your emergency funds in an account where they will earn some interest, but don’t tie them up in term deposits. Until your fund is mature, you’ll want to keep it liquid, so you can access it quickly. Automate deposits, as much as you can afford, every payday. And when you do come into some money by surprise, make sure you put some in the fund. Every little bit helps. Even a few hundred dollars can help keep you out of financial trouble.
Leave it Alone
If you have to ask yourself “Is this really an emergency?” before dipping into your fund, chances are it is not. A birthday you didn’t plan for, or a sudden invitation to a friend’s cottage are important, but not worth depleting your true emergency fund, which is designed for big bads, like transmission failure in your car, or worst of all, a surprise lay-off or other job loss. A little discipline now can lead to a big sigh of relief later.
Happy New Year from Creditaid! We’ve been helping Manitobans with their finances since 1992. Trust us, we’ve seen firsthand how useful an emergency fund can be. If you make and keep one resolution for 2019, take some steps toward building a solid emergency fund. It will make retrospection feel better next New Year’s, and it help keep you and your loved ones safe and happy in the event of a financial crisis.