Emergenies can happen at any time. Planning finances on your own can be tough, and it’s not easy to find a reputable financial advisor in Sydney. But that’s okay. This article will show you how to get started with your own emergency fund, whether it be for a month or for longer periods of time.
Set a target date for setting up your fund
Setting a target date for building an emergency fund is important. For example, you could set the goal of saving $1,000 by your birthday. Or maybe you want to be able to pay off a credit card all at once in six months’ time. Whatever your goal, it’s important to have one and stick with it.
Take stock of existing assets
Before you can begin to build your emergency fund, it’s important to take stock of what assets you already have. This includes looking at all of your investments, bank accounts and any other savings instruments. You might be surprised at how much money you already have in these places—especially if you’ve been putting off an emergency fund because of a lack of funds.
For example, if someone has been paying down debt on their student loans but hasn’t had time to invest in other assets they may find that they have more money than they thought available to them. Many people are surprised when they see how much money is actually accessible to them after making these types of adjustments!
Draw up a monthly commitment
Before you get started, draw up a monthly commitment. How much do you want to save each month? How much do you want to save each year? A good rule of thumb is that you should aim for saving 10% of your income—and if that seems too high, remember that many financial advisers recommend saving more than 10%.
If contributing 10% feels like too low an amount for your emergency fund, consider how much money could be potentially lost by not having one. Consider: What would happen if something unexpected happened like losing your job or being in an accident?
How would it impact your life if a major repair or medical bill came due at the same time as a large monthly expense (like rent)? By setting aside money ahead of time, these scenarios are less likely to become reality and cause further stress on top of already stressful situations.
Create a separate account for the accumulation
There are a lot of options for setting up your emergency fund, but one thing to keep in mind is that it needs to be separate from any other account you have.
The reason for this is simple: if you need money from the fund and your bank doesn’t have it, they may require you to close out all the other accounts in order to get at it. If this happens, then not only will your emergency fund be gone but also so will anything else in those accounts—and probably with fees attached too!
Channelise any lump sum inflow into your emergency fund
A great way to channelise any lump sum inflow into your emergency fund is by setting up a separate account. You can do this by opening an online bank account with a top-notch bank or financial institution. This will help you keep track of the money that comes in, and also make it easier for you to transfer it into your emergency fund.
Building an emergency fund is a great way to protect yourself against unexpected financial emergencies.
