Emergency Fund

Cusco, Peru

An essential part of your financial plan is to have an emergency fund that should be equivalent to three to six months of bills. Life is unexpected, as we have seen with the recent coronavirus pandemic, and there could be times when you are not producing income. These reasons could be taking care of a loved one, illness, another pandemic, or an unexpected layoff. Having an emergency fund will allow you to feel more secure knowing that expenses are covered until you have secured new employment or disability insurance begins. Also, there will be times when your current job will not be suitable for you for various reasons. You will have the necessary funding to seek new employment and improve your situation by having an emergency fund. If you do not have an emergency fund, you risk losing your apartment or home, credit card debt, and an inability to pay for basic needs. Not having an emergency fund could be an extremely stressful situation that could further lead to depression and anxiety, affecting many aspects of your life. Save for your emergency fund in conjunction with investing in your 401K and after you have paid off high-interest debt such as credit card debt or personal loans. Do not feel discouraged that you do not yet have the three to six months of bills needed in your emergency fund. Your financial plan is a lifelong journey; find solace knowing that you are moving in the right direction.