As I’ve said before, having an emergency fund is in my opinion one of the most fundamental things that one needs to do in one’s wealth-making journey. Read about them in here and here.
Again, what is my emergency fund for?
1. To cover those UNEXPECTED medical expenses. Maybe because of problems in insurance claims and etc.
2. To cover my monthly expenses in case I get laid off from work.
3. Really, to cover those UNEXPECTED expenses.
I will initially assume RM2,000 per month worth of expenses. So, here are my beginning targets:
- Target 1: To achieve 6 months worth of monthly expenses. Thus, RM12,000 needs to be in the emergency account.
- Target 2: Once Target 1 achieved, aim for 12 months worth of monthly expenses. Thus, RM24,000 needs to be in the emergency account.
Sounds simple huh? Well, there are few things that I need to remember. They are:
– I need to be disciplined enough to not touch the money unless it was ABSOLUTELY NECESSARY
– The first target is the bare minimum that needs to be achieved and it needs to be achieved as quickly as possible.
– If my monthly expenses go up, then I need to increase the balance in my emergency account.
– It would be absolutely important to not go over my monthly budget.
I’m currently halfway through on my first target.
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Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.
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