It is common knowledge that having an emergency fund is important. It gives you a cushion to fall back on in case of unexpected expenses or income loss. However, many people don’t realize just how important it is to have an emergency fund before making any other financial investments, says James McArthur AG Morgan. The experts at the advisory firm are highly experienced in guiding you in the right direction when it comes to financial investments!
What Is An Emergency Fund?
An emergency fund is a money set aside to cover unexpected expenses or income loss. It is important to have an emergency fund because it can help you avoid taking on debt or selling investments at a loss. A well-funded emergency fund should contain 3-6 months of living expenses.
Reasons to explore for investing:
- There are several reasons why building an emergency fund should be your top priority before investing elsewhere. First, if you don’t have an emergency fund, you will be far more likely to have to take on debt if something unexpected happens. This can set you back financially and make it much harder to reach your long-term financial goals.
- Second, an emergency fund can help you avoid selling investments at a loss in order to cover unexpected expenses. This is especially important in volatile markets where investments can lose a significant amount of value in a short period of time.
- Finally, having an emergency fund gives you peace of mind. Knowing that you have money set aside to cover unexpected costs can help you sleep better at night and feel more confident about your financial future.
Tips for doing so:
1. Decide how much you need to save: Start with $500 for small emergencies and aim to have 3-6 months of living expenses saved for bigger ones.
2. Open a separate savings account: This will help you avoid dipping into your other investments when an emergency arises.
3. Automate your savings: Set up automatic transfers from your checking account to your emergency fund so that you’re consistently saving money.
4. Make it a priority: Don’t let other financial goals (like investing) take precedence over funding your emergency fund. It should be one of your top priorities.
5. Review it regularly: As your life changes, so will your emergency needs. Make sure to review your emergency fund on a regular basis to make sure it still meets your needs.
Building an emergency fund should be a priority for anyone with financial goals. It can help you avoid debt, sell investments at a loss, and have peace of mind in knowing that you’re prepared for the unexpected. Follow the tips above to get started on building your own emergency fund today.
Endnote:
If you don’t have an emergency fund yet, now is the time to start building one. Begin by setting aside a few hundred dollars each month until you reach your goal. Then, make sure to keep the money in a safe place where it will be readily available if you need it.
Building an emergency fund should be your top priority before making any other financial investments. Doing so will help you avoid debt, protect your investments, and give you peace of mind.
