What is an emergency fund?

[shukla7789]

I think that since the blog was created, I haven't written enough specifics about the emergency fund. Although I've been saving money for it for over a year now. The basic concept of saving in this way is seemingly trivial to deduce, even from the name. However, the topic is very interesting, it's worth delving into. I won't even mention that in my opinion every conscious citizen should have such a fund. These are the basics of personal finance, which should be taught in elementary school.

Definition and explanation
An emergency fund is a financial resource set aside to address specific, often random and/or unexpected life situations. This will allow you to resolve them in a simple way, without getting into debt or lowering your standard of living.



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Why do you (or your family) need such a fund? Imagine that you or your significant other lose your job. Your income drops immediately, and you have to get money from somewhere to pay rent, bills, food, payments, etc. Without an denmark whatsapp database fund, your standard of living will drop drastically. You may end up having to borrow money, which in the long run will only add another problem to the list. However, when you have money set aside for unexpected expenses, things are much easier.

How big should an emergency fund be?
The debate on the size of this fund is ongoing. Some advise putting aside money equivalent to a month's living expenses (rent, bills, food), while others mention quarterly expenses. David Bach, in his course "Automatic Millionaire", advises putting aside money to maintain your standard of living for six months. Suze Orman, on the other hand, mentions as much as eight months. Another famous "life coach" (I think it's Brian Tracy, but I'm not 100% sure) advises putting aside enough money in an emergency fund for a year.

Save systematically
In my opinion, the most important thing is to start and stay systematic. Put aside as much as you can for your goal, which is an emergency fund. Ideally, the same amount every month or at least the same percentage of income. The most important thing is to start. When I was putting aside my first money for this goal, I assumed that 3,000 PLN would be enough for me to survive for 3 months. During which I would find a job or build a source of passive income.

Today I know that this amount is not enough. That is why when I saved 3 thousand, I decided to increase the amount of savings. Since I feel good with such a financial buffer, I can build an emergency fund at a slightly slower pace, which will allow me to survive half a year. Currently, I have a little less than half of the final amount saved. However, if something unexpected happens, even this money will easily get me out of most troubles.