Having an Emergency Fund
Another important component of a ‘complete’ financial plan is having a contingency plan. An important element of that contingency plan is by having an emergency fund (i.e. some money set aside for those rainy days).
It is indeed important to have some significant money set aside just in case something bad happens like major car repairs, major home repairs, urgent surgery, and etc. Yes, having insurance can cover these instances but sometimes, you yourself need to pay first before claiming from your insurance company. Plus, sometimes, it can get a long time for your claims to be processed. Who knows, you might even have problems with your insurance policies?
So, how much money should be left aside? It all depends on the individuals. 6 months worth of your expenses is fine. 12 months is better. 18 months worth of expenses is even much better! The idea is, the more you have, the better.
Where should you park this money? Under the pillows maybe? Hell no!
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