Sunday, December 18, 2016

Why You Need An Emergency Fund

A friend of mine has been having quite the year.  She has spend the majority of this year battling a life-threatening illness, and I'm thrilled to say that she has recently (within the past month) received news that she has won her medical battle, and is recovering nicely.  No sooner does she receive this wonderful news than she finds herself on the side of the road (the freeway no less) with car that has decided it will no longer run.  There she is, emotionally distraught and alone.  People are kind enough to pull over to try and help, but the car won't start.  She has to call a tow company, and has her car towed to her mechanic's garage.

Everything about this scenario stinks.  It's embarrassing.  It's frustrating.  It's expensive, and unfortunately, it's extraordinarily common.  The towing expense alone could set you back plenty, not to mention the mechanic's bill.  If this happened to you, would you have the funds to cover it?  Would you have to charge it on a credit card?  This is where your emergency fund comes into play.  You absolutely need one of these.  It's not about whether or not one of life's "what ifs" occurs, its about WHEN, because an emergency WILL happen eventually.  Whether it be a medical bill, a car problem, or something else unforseen, you can guarentee something will come up eventually.

On the positive note, this friend HAD the money.  She's been diligently squirreling away little bits of money every month for a few years now.  While her emergency fund is smaller than she would like, it has been enough to see her through a difficult year.  Can you imagine what would have happened to her if she hadn't been saving these little bits every month?  What would happen to you if you were in her shoes?

Emergency funds are about more than life's "what ifs."  It is about no longer living in fear.  I have lived in fear in the past, fear of a car issue, getting sick and not having enough PTO to cover it, fear of a roof leak, you name it.  I always felt like I was walking on financial eggshells.  I no longer feel that way.  One of the reasons that I no longer feel this way is because I do have an emergency fund.

Now that you know why you need an emergency fund, read Roth IRAs and Emergency Savings a Clever 2-in-1 for an easy strategy to make the most of your savings!

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