Importance of An Emergency Fund
An emergency fund is one of the most important things that you should establish for your family because if you or your spouse are unable to work and earn an income for any reason, that fund will provide you with the backup that you need to cover your monthly bills and expenses until you’re able to get back on your feet again financially.
You Should Have an Emergency Fund Before Buying A Home
Even though you may have a great credit score and down payment ready to buy a home, if you don’t have an emergency fund saved you literally are taking chances with your financial security because one accident, injury, layoff, job loss or home repair could set you back and make it difficult for you to recover financially.
Sadly, many home buyers will put all of the money that they have saved into their down payment and closing costs on a home then once they move in they will be left living paycheck to paycheck and if one big expense occurs, they will be unable to handle it.
How Big Should Your Emergency Fund Be?
Your emergency fund should be between 3 and 5 times the amount of money that you need to survive on a monthly basis.
For example: Let’s say that you need $5,000 per month just to pay all of your bills and expenses, ideally, you should save between $5,000 and $25,000 saved in your emergency fund before you purchase a home.
Give Yourself the Time to Build Your Emergency Fund
When it comes to finances and your credit, you may be in great shape right now but if you don’t have an emergency fund, you’re literally putting yourself in a position of potential financial peril each month because one household expense, bill, or job loss could make it impossible for you to recover financially.
If you’re working in a stable job right now, why not give yourself the next 8 months to save the money that you need for your emergency fund? Giving yourself this time will provide you with peace of mind and place you in an even better position financially that enables you to withstand anything that may come your way financially after you buy a home or investment property.
Ideas for Building an Emergency Fund
Thanks to the Internet, in today’s world there literally are dozens of things that anyone can do to build an emergency fund besides working extra hours for their company or taking on a second job.
Depending on your skills you could easily start a side business and be part of the “gig economy”, sell stuff on websites like Craigslist/Facebook/eBay or Amazon, work as a temporary virtual assistant/coach/ teacher, or earn a commission as an affiliate online.
If starting a “side hustle” or second business doesn’t appeal to you, try eliminating costly things from your budget or searching for more affordable alternatives. A perfect example of this is switching mobile phone carriers (if you’re not under contract), changing cable TV companies, or switching to another insurance company.
Learn More – Contact the Fred Sed Group
Are you interested in learning more about building an emergency fund? At the Fred Sed Group, we have people on our team that have taken financial savings courses and have built their own emergency funds.