{"id":21407,"date":"2019-02-12T16:39:27","date_gmt":"2019-02-12T14:39:27","guid":{"rendered":"https:\/\/www.bondora.com\/blog\/?p=21407"},"modified":"2019-02-12T16:39:27","modified_gmt":"2019-02-12T14:39:27","slug":"emergency-fund-7-reasons-why-you-should-have-one","status":"publish","type":"post","link":"https:\/\/goandgrow.eu\/en\/blog\/emergency-fund-7-reasons-why-you-should-have-one\/","title":{"rendered":"Emergency fund: 7 reasons why you should have one"},"content":{"rendered":"

You\u2019ve heard it before and you\u2019ll hear it again\u2014establishing an emergency fund is of vital importance to your financial health. As self-explanatory as a financial term can get, an emergency fund basically is a stash of money that you set aside in case of, well, an emergency. Life likes to throw us unexpected surprises, and unfortunately, the bad can come just as suddenly as the good. To avoid the stress of being completely caught off guard financially should such an event arise, you should habitually designate a portion of your income toward such a fund. Below, you\u2019ll find some realistic reasons as to why an emergency fund is necessary.<\/p>\n

\"\"<\/p>\n

What constitutes an emergency<\/h2>\n

First, it\u2019s important to note that an emergency fund should only be used for a real <\/em>emergency. For example, a medical expense, a home or car repair, or suddenly finding yourself unemployed all constitute reasons for which you can dip into your emergency fund (see more below). An emergency fund shouldn\u2019t<\/em> be used for a vacation, a new wardrobe, or the latest iPhone upgrade. Nor should it be used for things that may come up, such as back to school supplies for your kids or for holiday gifts\u2014things such as these should be included in your yearly budget (i.e. miscellaneous expenses, etc.).<\/p>\n

\"What<\/p>\n

Why you should have an emergency fund<\/h2>\n

You\u2019re new to budgeting<\/strong><\/p>\n

If you\u2019re new to budgeting<\/a>, you may find you need to adjust in the future as some hidden expenses you forgot to include may arise. For example, you perhaps planned on buying a new car, thus budgeted for car payments but forgot to include insurance in your budget. Or perhaps you forgot about taxes\u2014as these unexpected expenses arise, you should adjust your budget to include them. To cover the expenses for the first few months as you get used to your budget, you can dip into your emergency fund.<\/p>\n

\"New<\/p>\n

2 – You\u2019re self-employed or a gig worker<\/strong><\/p>\n

If you\u2019re self-employed or an independent contractor\/freelancer, your income isn\u2019t steady and may ebb and flow dependent upon your contracts. While planning ahead may help you avoid any down time between contracts, sometimes it\u2019s unavoidable. An emergency fund can be a backup (to cover your non-discretionary expenditures) for times when business is slow. Additionally\u2014 if you\u2019re a gig worker or self-employed\u2014you most likely wouldn\u2019t be eligible for unemployment benefits if you suddenly find yourself without a job (knock on wood). An emergency fund can be a lifesaver in such a case.<\/p>\n

\"Self-employed<\/p>\n

3 – You have medical concerns<\/strong><\/p>\n

We\u2019d love to be able to say all medical expenses are covered by insurance, but that\u2019s not always the case (especially if you live in certain countries). Not only can base medical fees be high, but there can be so many additional costs that add up (think blood work, specialists, etc.). If you have a medical condition that requires extra care and expense, you most definitely should have an emergency fund. This is also (and especially true) if you suffer from mental illness\u2014there still is a lot of stigma surrounding it, unfortunately, and sometimes it\u2019s not always covered. You may have to miss work for a mental health day, and perhaps that isn\u2019t covered under your sick leave. Any medical condition, for that matter, may cause you to run out of sick days at work\u2014thus, an emergency fund can help fill the financial gaps.<\/p>\n

\"Medical<\/p>\n

4 – You have children or are hoping to have children<\/strong><\/p>\n

As much as you may like to think otherwise, having children means your life is that much more unpredictable and complex. As much as you can try to include expenses regarding your children into your budget, unexpected situations can arise. Your child could get hurt or sick, which means not only would you have to pay for the medical bills but you\u2019d either have to pay for someone to care for them or stay home from work. They could make a sports team, or try out for the school play…all requiring additional funds to cover equipment, etc. Perhaps you don\u2019t have children, but would like to in the future\u2014unless you\u2019ve taken secure steps to avoid it, an emergency fund can make all the difference if an unplanned little someone comes into the world. Children definitely are way more expensive than you can plan for, especially if you\u2019re on your first one. Luckily, you learn how to budget better as you go.<\/p>\n

\"You<\/p>\n

5 – You\u2019re a homeowner<\/strong><\/p>\n

The joys of owning your own home can be less than stellar when unexpected repairs are needed. While you should factor regular repair, upkeep, and maintenance into your budget, emergency situations may arise. Perhaps your plumbing bursts, and you need a plumber before your whole place floods. Or perhaps your furnace goes out in the middle of winter and you need a replacement\u2014these are situations in which an emergency fund can come in handy (repairs, handy\u2014see what we did there?). As we stated before, if you\u2019re new to budgeting and <\/em>new to home ownership, you\u2019ll come across regular expenses that you\u2019ll need to adjust your budget to cover\u2014taxes, upkeep, remodeling, etc. Talk to other homeowners before you buy, so you know the ways in which it may stretch your finances.<\/p>\n

\"Homeowner\"<\/p>\n

6 – You\u2019re in debt (and trying to climb out)<\/strong><\/p>\n

Debt\u2014depending on where you\u2019re from, it can be a regular part of life (think student loans) or a far-off concept. If you\u2019re attempting to climb out of debt, an emergency fund can help you to not plummet back down if something unexpected happens. Perhaps you went into debt after you lost your job\u2014you had to pay for a car repair and had to buy groceries. An emergency fund can be helpful should such a situation arise and will help you to stop just adding to your debt.<\/p>\n

\"You<\/p>\n

7 – You\u2019re the sole earner<\/strong><\/p>\n

If your household gets by on one income, you may be in dire straits should that income suddenly disappear. If you\u2019re in a dual income household<\/a>, the loss of a job isn\u2019t as big of a blow because you can still count on the other\u2019s person\u2019s income. If you\u2019re the sole earner and are unfortunate enough to lose your job, an emergency fund can help you cover your expenses while you look for other employment.<\/p>\n

\"Sole<\/p>\n

Of course, there are infinite emergencies that could arise, thus infinite reasons to have an emergency fund. Perhaps your identity gets stolen, or your elderly parents get scammed (there are tons of scams out there that target the elderly\u2014for shame\u2014so be forewarned if you have older family members). Perhaps you decide to take an offer for your dream job with a startup<\/a>, but it means a pay cut and a relocation. Anything can happen, and an emergency fund\u2014while it may not seem necessary at the moment\u2014will be something you\u2019re eternally grateful for when it\u2019s needed.<\/p>\n

Sure, it\u2019s important to think positively and to not dwell on the negatives\u2014just make sure your finances are prepared for them.<\/p>\n

We\u2019ve covered the whys\u2014stay tuned for future posts where we\u2019ll delve into the hows, whats, and wheres of emergency funds.<\/p>\n","protected":false},"excerpt":{"rendered":"

You\u2019ve heard it before and you\u2019ll hear it again\u2014establishing an emergency fund is of vital importance to your financial health. As self-explanatory as a financial term can get, an emergency fund basically is a stash of money that you set aside in case of, well, an emergency. Life likes to throw us unexpected surprises, and […]<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[119],"tags":[],"class_list":["post-21407","post","type-post","status-publish","format-standard","hentry","category-financial-well-being"],"acf":[],"featured_image":null,"categories_names":["Financial Well-being"],"category_name":"Financial Well-being","_links":{"self":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/posts\/21407","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/comments?post=21407"}],"version-history":[{"count":0,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/posts\/21407\/revisions"}],"wp:attachment":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/media?parent=21407"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/categories?post=21407"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/tags?post=21407"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}