Saving for Emergencies

Today, I return to the topic of investing with an emphasis on saving for those unexpected costs or occurrences.  We all like to think that it is hard to save now in this environment but if we do not save situations may arise that make our life extremely difficult.

Our first target should be to build up a savings amount equal to what you need to survive for at least six months.  This would include food, rent or mortgage payment, insurance, school fees, etc.  In our current situation if we were to lose our job we need to have some funds that we can draw on until we can find another job.  One never likes to think about losing a job but we do not want to be caught off guard.

Secondly, we need to have insurance on our cars, house and lives.  If we cannot afford to pay for insurance how are we going to find money to replace our car if it is stolen?  What about if our house burns down or is damaged by a hurricane where will we find the funds to rebuild or repair?  Additionally with the cost of funerals this day if a relative were to die we will need to find resources to bury them.  Most people do not think about health insurance but if you have to go to the hospital for a major surgery or if you are sick for an extended period of time and unable to work then it is nice to know that there is something to help you to cover the cost.

The principle to be followed is to give up something now in order to receive a future benefit from it.  Saving now reduces the stress that comes with having to find money in the time of an emergency.  Insurance is one way of providing funds for future unexpected emergencies.  Identify something that you can give up now in an effort to put something aside for the future.  It may be a movie, a play, a book, cable television, phone calls, dessert, snacks, new furniture, etc.  It may seem like you can’t live without them but these things are only temporary.  The most important thing is to look after the welfare of your family, encourage them to be a part, teach them to save and cut costs so that everyone understands and works towards the same goal.

Feedback question: Are you prepared for unexpected emergencies?