Saving for a Rainy Day
If 2020 has taught us anything, its been that we all need an emergency fund. An emergency fund is a sum of money that you set aside so that you have cash available for the unexpected—and in the case of COVID 19 the unprecedented—emergencies.
Your emergency fund can help you get through tough times like illness, unemployment and the completely unprecedented without devastating your finances. Here are a few tips to help you get your emergency fund started.
- Decide how much you want to set aside in your emergency fund. Two months of expenses? Six months? What are your fixed expenses that would have to be paid?
- Decide where you want your emergency fund to reside. Do you want to open a separate savings account and put money into it each month? How much? Or do you want to earmark a portion of a line of credit as your emergency fund and treat your regular monthly debt payments as contributing to the availability on your line of credit?
- Decide what expenses qualify as an emergency: unexpected job loss, urgent major repairs, unexpected medical expenses. Some expenses are just that, expenses that you should be budgeting for. Things like regular vacations, property tax, cars are not emergency expenses. An emergency fund is for emergencies and not shortfalls in your regular cashflow.
Remember that having an emergency fund isn’t the same as having long-term financial goals. It’s about having access to cash when you need it the most. Always pay yourself first and commit to putting aside your predetermined amount every pay cheque. Automate the deposits to your emergency fund, so you never forget or spend the money elsewhere.
Want to feel prepared for anything? Book an appointment with one of our Coaches to develop a financial plan that grows with you and helps you prepare for life’s unexpected moments.
Visit our website to book a time to speak with one of our Coaches at www.thebetterlifeco.ca or email info@thebetterlifeco.ca.