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BUDGETING FOR EMERGENCY FUNDS
Emergency funds are considered to be a necessity as far
as financial security is concerned, since it can provide one with financial
resources that one can resort to and depend on when an emergency arises such
that when one is sick and have the burden of paying huge medical bills, or
unexpected home or major car repair.
When one has no emergency fund, one can be obliged to
acquire debt on your credit card that might take several years to repay with
interest that would later cost so much more.
However by putting an extra thirty to fifty dollars every
month in an individual “emergency savings account” one can be secured with what
emergency the future may bring. In doing this, it is recommended that one
regards the emergency fund as an additional bill, to be punctually paid each
month.
Yes, one can and should budget and allocate the extra
money for emergency fund, as this is very significant when one refers to his
“financial future”. Here, the goal is to create savings from budgeting your
income; the emergency savings should ideally be equal to at least three months
your living expenditures.
What's important is that you should steadily put a
certain amount of money aside, and only use it for real emergencies.
Not like an investment, the success of one’s long-term
savings funds does not really count on the amount of return or interests but on
placing a fixed amount of money away constantly and steadily so to have
immediate access to it at all times.
In spite of one’s financial status, the initial step in
the process of constructing an emergency fund is by knowing where your money is
presently being consumed or spent.
When one recognizes and determines where one’s earnings
are spent, then it will be easy for one to choose and make a decision where to
trim down expenses. In other words, budget.
Budgeting is putting or setting aside money for
anticipated and unanticipated future use. It is here that one sets up a goal so
as to save. So set an emergency fund as your goal.
Checking, savings, money market accounts and
“certificates of deposits”, are great places to keep one’s cash that might be
needed on quick notice.
The amount saved from budgeting can either go to your
savings goal, emergency fund or both. One could utilize the money saved from
budgeting financial expenses by saving half of it to your savings account and
half of it for emergencies. This way, you achieve your goals in savings and at
the same time put in funds for emergency use. It’s your choice.
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