Emergency Fund 101
To achieved financial freedom, money gurus will ask you to pay your debt first, save, secure yourself and have various kind of investments.
I read a lot of financial books and they are all saying the same thing. Every time you receive your paycheck they will advise to set aside at least 20% of it for your savings.
The emergency fund is something you can use for well, emergencies. Is travelling emergency? of course not… The things we could consider as emergency is losing a job, hospitalization, death or calamity.
It is advisable to save up to 3 months of your expenses (for singles) for their emergency fund and at least 6 months to 1 year for married individual with kids.
How are you going to know how much to save? Well, you should start with checking your monthly expenses. Tally it to check how much money your need to pay the bills, food, transportation etc every month.
For example you computed 20,000 monthly expenses then just multiply it to 3 for single and multiply it to 6 for those with kids.
The emergency fund should be put in places where you can easily get it in times of need. You can put some on the bank with ATM so that you can withdraw it anytime, or place it somewhere around the house so that even during strong typhoons and floods you have something to use.
I know it’s hard, you need to cut out some unnecessary expenses to reach this goal. You can opt to just cook at the house instead of dining out. Control yourself in buying new clothes or shoes until your reach your goal. Increase your income by doing extra things like those I have mentioned in this POST.