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Emergency Fund: What It Is and How to Set It Up

The pandemic stopped economic activities all over the world. Millions of people are displaced. Millions more will be jobless by the time the global lockdown is lifted. We’re all stuck in our homes, wondering how we’ll survive an economic onslaught of this magnitude. Sure, we’re worried about our health and the health of the frontliners. But let’s be honest. We’re also concerned about how this pandemic has impacted our finances.

That makes you wonder why you haven’t set up an emergency fund, to begin with. After this, you can ask your bank for a refinance scheme in Bowling Green or other cities. Maybe this way, you can get lower the interest for your existing loans. If you can reduce your monthly amortization by $100, you can use that money to start your emergency fund.

Your emergency fund can then be used for situations where you are forcibly stopped to go to work and earn. You can use it for unforeseen medical expenses and home repair or replacement. You can also tap into your emergency fund for major car repairs.

How Much Should You Save?

As a rule of thumb, you should have three to six months’ worth of expenses saved up. This money will allow you to cover your costs while you find another job (if you lose your current job). It will keep things afloat while you find another economic opportunity. Add up your monthly expenses (including utilities, food, debts, and miscellaneous fees) so that you can get an idea of how much you need to save.

Transfer Funds to Your Emergency Fund

emergency fund

Set up a goal each month. If your goal is to save at least $100 a month, make it a point to set aside that money and transfer it to your emergency fund. You can do it in installments as long as you complete the amount by the end of the month. Of course, you are welcome to add on that amount if you have more.

Get a Change Jar

Set up a jar at home where you can drop the change once you break a $20 or $50. You wouldn’t notice that you have filled up the jar with $1s or even $10s. If you add these all up, you can transfer them to your emergency fund. This is a great way to boost your savings without a big sacrifice. You wouldn’t even notice the $1s and $10s you dropped there.

Save Your Tax Refund

You get a shot at this at least once a year. You will get your refund between January to April, depending on how early you filed your income tax. If you are eligible for a tax refund, make sure to save that money. This is money you barely expect, anyway. Save it up for emergencies.

You can also not depend on your employment alone. Easily find side jobs that will boost your monthly income. That will help you set up your emergency fund faster. If the news is correct, this isn’t going to be the first time the world will see a pandemic of this magnitude. You should be well-prepared next time.

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