Doffinc - Emergency financial situations can occur to anyone
and practicing any financial arrangement is not ideal without planning for such
an event. The idea of having an emergency fund is to offer protection against
unexpected costs.
This will ensure that there is no negative impact on your
financial condition and does not damage overall financial security. There are
many circumstances that can cause financial emergencies such as sudden illness,
accidents, medical emergencies, emergency home repairs, job losses, emergency
car repairs and more.
The main reason for having an emergency fund is very clear
because when someone falls into an emergency financial situation, they must
destroy their savings or make a compromise to get the money needed.
Contrary to public opinion,
Credit cards are the worst way to fund any financial
emergency. The fastest way to get thousands of dollars to get a car loan is not
a long-term solution but a short-term solution. In circumstances where you have
taken an advance with your credit card to get the money needed, the credit card
company will charge you with cash withdrawals at an interest rate. This is a
very expensive way to borrow and manage finances for emergency situations.
Some professional experts agree that a minimum monthly
income of 3-6 months must be set aside for emergency situations. Everyone must
order additional cash in the event of an emergency. It is also ideal for saving
for 6 months even though some financial advisors approve full-year cash.
These funds must be set aside in the instrument, which is
easily available when needed. It can be in the form of money in a bank account,
cash, liquid funds or fixed deposits. This will ensure that funds can always be
accessed instantly or in a short time when needed.
Save your emergency funds in a safe and easily accessible
place because you may be required to immediately collect cash during an
emergency. The best option you have is to open a money market account or
savings account. But, always check their offer related to interest rates,
minimum balance, and other conditions.
You can now sleep easier and try to start putting your extra
savings into accounts or investments with higher interest and less accessible.
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