Life is filled with so many uncertainties that even the sharpest of prognosticators will find it difficult hitting the right mark with their predictions. A single financial emergency or panic such as an unplanned medical bill, job loss, or even fire outbreak in our home can alter the state of our lives plunging us into chaos and making us financially vulnerable. However, it is ideal to know that these unfortunate circumstances are regular occurrences in life that we can not escape from as human beings but that can be tackled if we intentionally plan for them in advance by keeping emergency funds in place.
Emergency funds are that funds we reserve or set aside in case of unexpected events or financial emergencies. The significance of this funds cannot be overemphasized and having enough stashed in the right place will be really handy in helping us to offset our financial burdens. The essential nature of these funds can be seen on the display during the recent covid 19 pandemic that struck the world in 2019/20 as people with emergency cash were able to weather the financial storm that was unleashed during this period while those with nothing to fall back were left gasping for financial relief that was unfortunately nowhere in sight.
The right quantity of cash that should be set aside for emergency funds have been a major issue this days for people to decide. However, many financial experts and bankers have suggested that it is ideal to save up to 3 to 6 months worth of our salary and that in the likely event that we experience a job loss, we can easily use this cash to hold on for some couple of months before getting a new job. Nevertheless, the amount is not that fixed because it is subject to our level of income and life's preferences. The best way to ascertain the amount is by calculating how much we spent monthly on expenses such as groceries, rents, utility bills, and mortgage. We should possess enough funds in our financial reserve to cover for the aforementioned expenses for 3 to 6 months.
After determining the amount of money to be put in place for emergency fund, the next step is searching for the platform to save or keep the cash. We can use a range of option such as banks or credit union account, prepaid card, and physical cash. While banks and credit union are safe places to keep money, having it in the form a physical cash can be handy especially during emergencies but the downside is that they are vulnerable to so many misfortune like thieving, loss, or damage.
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