Tuesday, August 7, 2012

Why Emergency Fund Is So Important

photo credit here

I have a habit of watching the morning news to get my day starting but I was shocked to learn that some parts of Metro Manila was submerged in raging water caused by the non-stop torrential rain. As I listened to the news, the word emergency preparedness is always mentioned. And so, it struck me that life is very unpredictable. On one moment, we might be living comfortably in our homes and the next, we might end up in the streets cold and wet because of the flood took every bit of possession that we have. I came to realize that being ready at all types of emergencies is very important and aside from being prepared for natural disasters, it is also important that we prepare ourselves for financial disasters thus this post.

Honestly, I did not resign from my day job to pursue an online career with a fat emergency fund. In fact, I only had a few bills in my wallet to begin my journey as a freelancer. I thought that was enough but last month, one of my online jobs had a problem. Yes, I was out of work for almost a month. To make matters worse, that particular online job is the one that is bringing me more income than my other two online jobs combined. It was like loosing a limb and with the bills piling up and my daughter going to school already, I ended up getting constant headaches because I have to think of ways to fund for everything. Thank goodness that I was able to survive with some comfort because of my emergency fund. However,  my emergency fund has now gone back to zero so I need to start saving for it again. Hopefully I will be able to achieve the 12-moth worth fund mark within a year  if nothing else happens so I am praying and crossing my fingers real hard that everything will go smoothly for the next few months.

As the name implies, an emergency fund is something that you use to fund for emergency situations such as getting yourself fired from a job, being hospitalized and other unforeseeable emergencies. Generally, an emergency fund should be equivalent to at least six months of your salary for the premise that it usually takes about six months before an individual can find another job to sustain himself or herself. Your emergency fund allows you to live comfortably within the next few months even without a job.  However, in my cases, I am eating and working for two so I need to have at least six months worth of my earnings in my emergency fund. I’ll be dealing more about how to plan and prepare for emergency fund in my next posts so stay tuned.

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