We can’t emphasize the importance of an emergency fund more. We’ve already posted on how to build up your own emergency fund.
Let us expound on the topic. Given the recession, you should have at least six months to a year’s worth of living expenses as emergency fund.
First of all, let’s be clear on what things do you actually need an emergency fund for.
What are emergencies anyway? Your mother-in-law’s birthday is not an emergency. Your anniversary isn’t an emergency. These are events that happen yearly so there’s no reason to consider them emergencies.
A blown water pump in your car is an emergency. Hospital bills from your kid’s broken foot from a skateboarding accident is an emergency. Getting laid off is an emergency.
So in such unfortunate instances, you’d only be thankful that you have your emergency stash to tap into. But what do you do after? Once your affairs are in order again, well, you should replenish the fund, of course.
It might take a few sacrifices again such as deferring buying that new widescreen TV but it’s always important to keep your emergency fund topped up.
Rainy days come fast and plenty these days so why leave a nasty gash on your umbrella?