An emergency fund is an isolated saving used to offset expenses of an unanticipated situation. People make the mistake of considering it to be part of a long-term savings plan for other important issues. It is for emergency or unpredicted situation that may arise in the future, as simple as that.
Experts advise that an emergency savings fund should be enough to cover major expenses at least for six months. This is maybe asking and daunting for someone who earns little.
This kind of saving isn’t usually measured in terms of how much, rather, its months of living expenses that money could cover. That being said, everyone will have a different amount, and everyone will have a different need.
However, you could start by saving or targeting one month’s expenses and form from there. People usually ask how much does one need to save? Answering that question means another part of our expenses may suffer as you save bimonthly. It is advisable to consider these expenses when determining how much to save:
Food: Food is costly in developing countries but you need to estimate your monthly food expenses, write down these costs in your emergency fund savings. Save some cash on food by reducing expenses, you can do this by buying in bulk, cutting down on eating out.
If you always shop online, look for coupons, build your shopping list around sale items etc., and then apply those savings to your emergency fund.
Personal expenses: this part of expenses often cost money without you paying huge attention it. They may seem generally inexpensive but can add up. We spend on things like haircuts, clothes and toiletries, household supplies. Recall adding them up, while figuring out how much to save for an emergency fund.
Housing expenses: There are was you could reduce our expenses in housing. Don’t live in an apartment that has several rooms that are not in use. All the rooms have to be in critical usage. The idea is to reduce our monthly expenses on this item and save them for your emergency.
Debt repayment: is not everybody that owes if you do then try to take steps now to get out of debt especially when you are not unemployed to avoid the stress of dealing with these expenses. If you have trouble balancing paying down debt with saving, there are some tips that can help you find balance.
Transportation: If you have a car, your emergency savings should cover necessary costs such as your fuel, emergency repairs car loan, automobile insurance, simple maintenance etc.