A strong emergency fund is all about peace of mind says Peter DiCaprio. It takes away the worry and stress of “Will I be able to afford this unexpected expense?”
It builds security in your life, both financially and emotionally. For example, you’ve probably heard stories of people who had to declare bankruptcy after a medical emergency wiped out their savings. Or even worse, someone who got sick or lost their job during the recession while they carried massive consumer debt on credit cards—they were forced to file for bankruptcy because they couldn’t make the minimum payments anymore. Avoid these nightmares by building an emergency fund that covers at least six months’ worth of expenses (ideally three years’ worth). If you’re debt right now, it’s more important than ever to get on a plan to pay it off. We would all rather have our emergency fund intact when bad luck strikes, but if being debt-free is the only option you have right now, then by all means get out of debt first—then build that safety net!
Here are eight reasons why you should do both:
1) Create a Disaster Emergency Fund
It is possible that one day, you might get a phone-call from your elderly parent who needs help. Maybe she had a stroke and has been in the hospital for over a week. She’s lost her job and has no way of paying for her medical bills, let alone rent or food for herself…
2) Save up For Unfortunate Events
What happens if someone hits you while driving? What if they have no money to pay for their damages? It is very likely that you would need cash right away to hire a good attorney who can fight on your side.
3) Defend Yourself from Financial Mishaps
In order to successfully file a lawsuit against someone, it is important that you have documentation of every single thing done by them explains Peter DiCaprio. If you do not have any proof, it will be impossible to seek compensation from them.
4) Stop Debt Collectors in their Tracks!
Debt collectors will stop at nothing to get money from you. Even if your income is minimum wage and you barely make enough money for yourself, they still might try to take advantage of you by getting a court order against you forcing you to pay whatever legal fees and the original debt that they claim that you owe. (This has happened to me!)
5) Build an Emergency Fund to Save Yourself from Financial Hardship
If the previous reasons didn’t convince you about why building an emergency fund is absolutely necessary, I suggest reading on…
6) Protect Yourself from Emergency Expenses!
You might not think that you need an emergency fund, but an unforeseen event can happen to anyone at any time says Peter DiCaprio. What would you do if your car got hit and the repair was over $1,000? Would you be able to afford it? (I know I couldn’t!)
7) Build a Safety Net for Yourself in Case of Unemployment through no Fault of Your Own
What would you do if you were laid off or fired without having another job lined up? It’s impossible to plan for such events; they just come when they come. But with a big chunk of cash in your savings account, it won’t be so bad when these arise.
8) Build a Security Fund for Emergencies
Do you know the difference between a savings account and a checking account? Money that is kept in a savings account can be used to cover any unforeseen expenses. It’s always nice to have some sort of fund set aside that will be able to help your family if they needed it.
It’s very important to have a big emergency fund explains Peter DiCaprio. If you think you can only save up a small amount of money, it doesn’t matter. You should always try your best no matter how small or large it is!
Always remember that the key to living a good life is all about setting realistic goals and your ability to achieve them!