It seems like life is always throwing curve balls our way. One day we can be living the dream, and then the next, we’re just trying to survive.
And when things start to go awry, it’s easy to panic and thinks, “What am I going to do?”
While it’s true that unexpected events can happen at any time, there are some ways you can prepare for them.
And since you never know what will happen, I suggest creating an emergency fund to ensure that you don’t have to worry about paying for anything in the future.
So let’s take a look at a few different ways you can create an emergency fund that will allow you to survive anything life throws at you.
Emergency Fund Examples to Prepare For
Home repairs
Home repairs are never fun, but they're necessary. If you have to make an emergency home repair, it's important to have an emergency fund ready to go. Here are some examples of how you can put your emergency fund to use:
1) Replace a broken water heater. This is one of the most common home repairs, and it can be very expensive if you don't have your own replacement on hand. Even if you don't need this now, having it will ensure that your family has heat when they need it most.
2) Repair a hole in the roof caused by a storm or other natural disaster. Again, this is an extremely common problem for homeowners—and insurance doesn't cover everything! Having money in your emergency fund means that when bad weather strikes (or even if it doesn't), you won't have to worry about whether or not you'll be able to make sure your family stays dry and warm during the winter months.
3) Repair or replace broken windows or doors after being broken into by burglars or other intruders (or even just kids!). We've all seen stories of people who have had their homes broken into—and many times these homeowners didn't even know until it was too late. Keep your home safe with a security system, but also make sure that your windows and doors are in good shape by getting them repaired or replaced whenever necessary.
Job Loss
If you've ever been laid off, you know exactly how scary it can be. It's like the rug has been pulled out from under your feet, and all of a sudden you're looking at your income going down and your expenses staying the same.
That's why it's so important to have an emergency fund. An emergency fund is just a stash of money that you have on hand for unexpected expenses, like a medical bill or car repair. It doesn't have to be huge—the average American household has about 6 months' worth saved up in case of job loss or some other financial disaster.
But where do you even get started? What kind of account should you use? How do you save enough money to cover your expenses for 6 months when it seems impossible at first glance?
things that can contribute to a job loss include:
The lack of experience in the position:
In some cases, employees are let go because they do not have enough experience in their positions. For example, if an employee is hired as a supervisor and then promoted to manager without any experience as a manager, it may be easier for the company to terminate them than to continue paying them for the position that they can no longer perform well.
The decline of income for the company:
In many cases, a company will lay off employees when their sales or profits are down because there is no need for additional staff. This can be due to poor management or other factors outside of an employee's control, such as changes in market conditions or competition within their industry sector.
No need for that position anymore:
Sometimes companies will decide to eliminate positions because they have been replaced by technology or automated processes that make them unnecessary (e.g., self-checkout lines at grocery stores).
Pay Cut
The first thing you need to know about paying your bills on a reduced income is that it's not going to be easy. There are no magical tips or tricks to make this situation better—you're going to have to be smart, organized, and disciplined.
But if you can get through this rough patch, it will only make you stronger and more resilient when the next challenge comes along. And believe me: there will always be the next challenge!
Here are some examples of emergencies that might cause you to receive a pay cut:
Economic challenges: If your company is having financial problems due to a drop in sales or increased competition for their products/services, they may decide to reduce salaries across the board as a cost-cutting measure.
Change of position: A new manager may come in who doesn't respect the work that you've done in the past and decides to demote you because of it. This can happen even if your performance hasn't changed—it's just their way of showing everyone else who's boss! (Or maybe they just don't like you!)
Personal choice: Sometimes people just want to take time off from work for personal reasons like having a baby or taking care of sick family members. Having an emergency fund will give them peace of mind knowing that they'll still be able to cover expenses while they're away from work.
It's good to act as if you might lose your job at any time because then you will be prepared for the possibility of not having an income. Having an emergency fund is a smart move because it allows you to negotiate for a pay raise or find a new job for the same amount of money you were making before.
Business Decline
If you're thinking about starting your own business, it's important to have an emergency fund in place. Having a cash reserve will help you navigate any bumps in the road that might come up, and allow you to stay focused on growing your business without worrying about how much money you have in the bank.
Here are some examples of what types of emergencies might affect a small business:
- Severe financial hurdles: If your business is struggling financially and you can't see a way out of it, an emergency fund can help keep things afloat while you look for solutions. You'll need enough cash on hand so that if things go south, you won't have to immediately sell your assets or go into debt in order to stay afloat.
- Issues in marketing: If something goes wrong with marketing campaigns, or if they don't perform as well as expected, this could cause serious stress on your company. An emergency fund can help cover costs related to fixing the problem or even just paying employees while you figure out how to fix it!
- Poor business planning: Sometimes bad luck happens—and when it does, having a cash reserve can help keep your business afloat until things get back on track!
Whatever the reason may be, having an emergency fund will help you stay afloat during these rough patches so that you can get back on track as quickly as possible.
Funeral Expenses for Unexpected Death
Funeral expenses are one of the most common reasons people end up using their emergency funds. This is especially true when an unexpected death occurs, which can catch you off guard and leave you unprepared for the costs of a funeral.
- Service fees:
This is usually a flat rate that covers all of the basics: the casket, burial or cremation, embalming, and other related services
- Transportation:
If a family member needs to travel from out of town to attend the funeral, they will likely need transportation to get there. Some people choose to drive themselves or take public transportation, but if they don't have access to either option they may need help with getting there in time for the service.
- Casket:
The average cost of a casket is $2,000 - $10,000 depending on whether it's made from wood or metal (wooden ones are more expensive). If you don't have enough money saved up then consider making your own instead! You can even look into renting one if necessary - just make sure that it's sturdy enough for heavy use over time so that it doesn't fall apart after just one use!
Medical Emergencies
Medical emergencies can happen to anyone, and when they do, it's easy to get caught up in the moment and forget about what happens next.
But if you're not prepared for medical emergencies, you could end up with a huge bill that you don't know how you'll pay off. It's important to plan ahead and start saving as soon as possible so that when an emergency strikes, you'll be ready to handle it.
Here are some examples of how an emergency fund can help with medical emergencies:
-Heart attacks
-Breathing troubles
-Strokes
-Cancer
If you're uninsured, medical emergencies can be a huge financial burden. It's important to have a plan in place so that you don't fall into debt or have to sell your possessions just to pay for an emergency room visit.
Car Repairs
Your car is a great way to get around, but it can also be a huge source of stress if you're not prepared for unexpected repairs.
If your engine needs repairs, that'll likely cost thousands of dollars. And if you need to replace a tire or two? That's another couple hundred bucks.
If you're driving an older car and want to keep it running for as long as possible, it's important to have an emergency fund for car repairs so that you can avoid taking out loans with high-interest rates which could end up costing more than the repairs themselves.
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Moving Expenses
Moving expenses are one of the most common reasons for needing an emergency fund. Whether you're moving across town or across the country, there are a few things to keep in mind when it comes to getting your funds together.
First of all, don't forget to estimate how much it will cost to move yourself and any pets. This can include gas for the car, tolls and parking fees, lodging costs (if necessary), and more—all depending on how much stuff you need to take with you.
Next, think about whether or not you'll need any help with moving. If so, this might mean hiring movers or even renting a truck if you don't own one. The last thing you want is to cancel your plans because you didn't account for these expenses!
common moving expenses:
Movers fees
Moving insurance for your items
Optional charges for movers
Truck rentals, if moving yourself
Gas
Storage units for extra items
Family Emergencies
When you're planning for a family emergency, you want to be sure you have the funding in place to support your family through any crisis.
There are many things that can happen to cause an unexpected expenses: car accidents, home fires, medical bills, job losses, and more. But if you don't have an emergency fund set aside for these kinds of situations, how will you pay for them?
You'll want to start by calculating how much money you'll need. If it's a large amount—say $5,000 or more—it may be worth it to set up an interest-bearing account with a bank or credit union and make monthly deposits of around $200 until you reach the target amount.
If your emergency fund is smaller than that, consider contributing smaller amounts on a weekly or biweekly basis until it builds up over time (say $50 per week).
It's important to keep track of what goes into this account and what comes out of it so that money isn't wasted on fees or lost interest by not having enough cash available when an event occurs requiring its use!
Cost of Living Increases
It's important to have an emergency fund in place, but it can be hard to predict what kind of emergencies you might face. One thing that can help? Knowing how much your expenses might rise in the event of a specific emergency.
Here are some examples from our personal experiences:
-A friend of ours had a dog who got into a fight with another dog and needed surgery. The vet bill was $3,000. Our friend didn't have $3,000 in her bank account, but fortunately, she did have an emergency fund that allowed her to pay for the surgery without having to put it on credit cards or borrow money from family and friends.
-We also know someone who had a job loss recently, which led to their rent being raised significantly higher than they could afford. Luckily for them, they had an emergency fund ready and waiting so they didn't have to scramble for ways to cover the extra expense!
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Random Expenses
When you're living paycheck to paycheck, it can be hard to set aside enough money for an emergency fund. But if you've got savings you can fall back on if something goes wrong, you'll sleep better at night, and that's worth it!
These random expenses can take a decent chunk of your money, and if you aren't prepared, they can be a major drain on your budget.
For example, if your child wants a new computer for the school year, that could mean having to take money out of your emergency fund to pay for it. If you don't have one set aside, that means you'll be relying on credit cards or other loans to cover it.
Or maybe you're planning on taking your partner out for a fancy dinner on Valentine's Day and want to get them something nice. You can do this with cash—but if you don't have enough saved up in advance, there's no way around it: You'll have to take out a loan or put it on your credit card.
Here are some random expenses that might come up:
Car Repairs
vet care
If something breaks in your house that needs replacing, like a broken window or a leaky pipe
Don't let yourself be caught off guard by unexpected expenses. Set aside a portion of your income for emergencies and you can sleep easier at night.
An emergency fund is useful for everyone, from those who are saving up for the down payment on their first house to those who are just trying to make ends meet. Create a savings account specifically for your emergency fund so that when an unexpected expense pops up, you'll be able to handle it without panicking or resorting to credit cards.
What should I put my emergency fund in?
It's a question that we get asked all the time. And it's one of the most important ones to consider because if you don't have an emergency fund, you might be stuck in a tough situation when a crisis hits.
The first thing to know is that it's federally insured for up to $250,000 per depositor. That means that if your bank fails and doesn't give you access to your money, the government will step in and make sure you're able to access it. But even if they were allowed to fail, they'd still be required by law to pay back all of their depositors by using other assets they own—and those assets are typically more than enough to cover any losses.
So what should you do with this money? In our opinion, the best thing is to invest in low-risk investments like CDs or treasury bills that won't lose value when interest rates go up—which they will eventually do as the economy improves.
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What are the 6 ways I can build my emergency fund?
STEP 1: Track your spending. This step is important because it will help you see where your money is going, which is the first step toward reducing your expenses. You can use a service like Mint to track your spending and see where you're overspending.
STEP 2: Reduce expenses. The next step is to figure out how much money you can save by reducing your expenses—and then actually do it! Think about all of the things that are unnecessary in your life and consider cutting them out one by one until you've reached your goal of saving money.
STEP 3: Increase income. If you want to be able to save more money, you'll need to increase your income somehow; whether that's working a side job or finding a better-paying job, there are lots of ways for you to make more money if you look hard enough!
STEP 4: Automate savings. Automating your savings is the easiest way to build your emergency fund because it takes the decision-making out of it. You can set up an automatic transfer from your checking account to a savings account, or you can use a separate account that's connected to your checking account so that every time you pay yourself, the money goes into your emergency fund automatically.
STEP 5: Have a plan for unexpected income. If you get a windfall—like an inheritance or gift—you need to put it in your emergency fund as soon as possible so that it doesn't get spent on something else. If you don't have an emergency fund yet, start one ASAP!
STEP 6: Find ways to save money on things like groceries and utilities so that you can put even more toward your emergency fund.
What are 4 specific assets suggested for your emergency fund?
The four assets that you should consider for your emergency fund are:
1. Cash savings account – This account should be used to pay for short-term, unexpected expenses like car repairs, medical bills, and property damage.
2. Money market account – This account should be used to pay for long-term, unexpected expenses like rebuilding a house after an earthquake or replacing a car after an accident.
3. CDs and Treasury Bonds – These investments are considered safe because they are backed by the government, which means your money is guaranteed not to lose value if you hold onto it for a long period of time. You can use these investments as insurance against inflation because they will steadily increase in value over time as the economy grows and inflation increases the prices of goods and services.
4. Stocks – Stocks are risky because they can lose value if the company they represent loses value or goes bankrupt; however, they offer higher returns than other types of investments over time which makes them more suitable for people who have more money than they need right now but expect their income to grow in the future (e.g., young adults).
Where Should I Store My Emergency Savings Fund?
Let's first talk about why it's important to have a rainy day fund. You never know when you could be hit with an unexpected expense, like a car repair or home repair—and if you don't have money set aside for these kinds of things, it can be really hard to cover them.
A high yield savings account is an excellent way to save for emergencies and other unplanned expenses. This type of account gives you access to your money whenever you need it, and it typically has a higher interest rate than a traditional savings account. This means that if you're saving up for something big (like a down payment), it's worth looking into this option!
Final Thoughts
The best part of having an emergency fund is that you don't have to worry about money in stressful situations. You can focus on getting through the problem at hand and not worry about how you're going to pay for it.
It's also important to remember that your emergency fund doesn't have to be large—it's just enough to cover unexpected expenses.
An emergency fund is a great way to start building wealth. It's easy, affordable, and even fun!
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