Emergency Funds – Your Stress-Free Guide to Better Money Management

Emergency Funds – Your Stress-Free Guide to Better Money Management

When it comes to personal financial management, it can be hard to know where to start. It’s common to spend and save reactively; we might pay bills as they arrive and put aside cash deposits irregularly in the hopes they will eventually grow into something significant. This approach can leave us feeling vulnerable with our finances. Such a haphazard approach can lead to ongoing stress and anxiety. Thankfully, there is a healthier way of doing things!

Emergency funds are an empowering way to get your money management in order ahead of unforeseen events or personal crisis. These funds are your private piggy bank, kept away from your other accounts, consciously saved in preparation for the future. Unexpected costs might be in the form of a major bill, home repairs, divorce or sudden unemployment. As much as we hope to avoid such calamities, it is not always possible to do so.

Lack of savings = Additional Stress.

Emotionally triggering occurrences such as marital breakdown or redundancy are difficult to navigate. As we attempt to pick up the pieces of the life we thought we had guaranteed, the worry of wavering finances soon becomes significant loaded stress. Without an emergency fund in place, we place ourselves in a highly vulnerable mental health position. Our attentions are pulled towards money-gathering rather than healing from the trauma we are faced with.

Emergency funds are your economic buddy. They are a financial buffer, providing a safety net when life doesn’t turn out quite how you would expect. If you have had problems with debt, you will know how slippery the borrowing slope is. It is challenging in ordinary circumstances to free yourself from credit card charges and loan interest accumulation, let alone when you have been hit with a sizable bill or are facing a period of low (or non-existent) income.

How much do I need?

There is no upper limit to how much you might want to set aside. It is a personal choice. As a general rule of thumb, it is wise to have enough saved to cover 3-6 months of living expenses comfortably. If this is the first time you have ever worked out what your monthly outgoings are, then there has never been a better time to do so. When we are fully informed and aware of our financial position, we can make smarter and more seamless decisions going forwards.

There is no need to overwhelm yourself by aiming for a high figure too soon. Make a simple and achievable plan to set aside $500 in the next 1-3 months, depending on your current salary rate. Once you have this in place, set your next target. In this way, you will increase your faith in your saving abilities while avoiding the aggravation of your stress levels in aiming for unrealistic figures. Fundamentally—build your savings pot as you build your emergency fund confidence!

Where do I put my Emergency Fund?

When choosing the right place for your emergency funds, bear in mind that you may want to withdraw funds promptly if and when you might run into an unexpected crisis. Therefore, a savings account with a reasonable interest rate and easy access is a highly desirable option for your emergency funds. You can choose to use the same banking provider you use for your other accounts or separate it all together by choosing a different bank with favourable terms and conditions. 

Alternatively, you could select high-yielding savings account to maximise interest levels while still being able to withdraw rapidly when and if required. These sorts of accounts are usually insured, leaving you with anxiety-reducing peace of mind that your money is in a safe place no matter what else changes around you. Now is the time to enlist a Financial Consultant to guide you in the right direction.

Are you feeling inspired?

Here are a few handy tips to get you started on the right financial track:

Evaluate your financial position regularly. Pushing bills and current account balance letters to the back of your kitchen drawer won’t leave you feeling empowered. Embrace a sense of honesty with yourself and remain conscious of what you earn and spend each day. Doing so will help you feel much more prepared if and when a financial hit might occur.

Use intelligent apps to support your saving. There is a multitude of well-designed apps that can help you achieve your savings goals. From deposit reminders to handy tools that ‘save the change’ and put it in your savings account, the options are limitless. Embrace the technology that has been designed to help, many are free to use some may have a charge for their service.

Celebrate your successes without spending.

Modern culture teaches us to ‘treat’ ourselves when we have done well in life. Train your mind to acknowledge how far you’ve come with your emergency fund efforts without needing to deplete the total figure in celebration. Recognise your success in a journal, or enjoy some cost-free time to yourself to reflect on how far you’ve come.

You have already made a significant step forward in your financial success journey by investing your time reading this article. You are aware that emergency funds are a necessary addition to your economic portfolio and personal situation, and now you have the tools in hand to make it happen. Get started today in setting aside the funds that could make all the difference later down the line. Your future self—and bank balances—will be happy that you did.

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