Why You Need An Emergency Fund
Life has a way of throwing curveballs at you, and it doesn’t consider the state of your finances when it does. An emergency fund is there to keep you financially secure through the unexpected. Whether that be losing your job, having a major repair, or any kind of loss of income. Having this cushion can also prevent you from needing to take out a loan and take on debt to get you through an emergency.
Build an emergency fund so that you can have peace of mind when it comes to your finances. An emergency fund is cash that can be easily accessed, that you only use in case of emergencies. This blog will go over how to get started, and will show you that building your emergency fund is attainable and necessary.
How To Build An Emergency Fund
An emergency fund is a savings that can pay for about three to six months of your expenses. Saving that much may seem daunting, but the goal of an emergency fund is to really have any amount set aside in case of life’s unexpected twists and turns.
Building a budget and tracking your spending can help you determine how much you need to save. Diamond has certified HERO financial counselors that can help you with this and keep you on track.
Take note of the necessary spending first such as groceries, car payments, housing bills, insurance, and any other expenses that you will have to pay no matter what. Then, you should calculate how much those expenses would be for the month, then two months, three months and so on.
The total will probably shock you, or make you feel like this is a daunting task. The truth is, yes, you’re looking at saving a lot of money. Keep in mind that it is okay to set smaller goals for yourself. Make your first goal to save $1,000, and then continue to go from there.
Remember that any amount set aside for an emergency is still better than zero, and you’re not going to save this up overnight.
After budgeting, consider what is a reasonable amount for you to set aside each paycheck. The goal isn’t to make yourself feel strapped for cash while you’re saving up, it’s to build this fund over time.
Where You Should Keep Your Emergency Fund
As you build your emergency fund, it could be tempting for you to pull money from it to spend on things that aren’t an emergency. On the other hand, if you do have an emergency, this fund needs to be somewhere that you could easily access the money.
For these reasons, you should build your funds in an account that is separate from your everyday banking, but it shouldn’t be in any kind of retirement account or mutual fund.
Diamond Credit Union has different savings account options that accrue interests depending on how much you have saved. Contact a Diamond representative to see which account is best for you, and to create a plan as you move forward.
Building an emergency fund might seem challenging, but the reward of financial peace will make it all worth it. For more guidance, set up an appointment to speak with one of Diamond’s financial counselors.
