When to use your emergency fund is one of the most important decisions of your life. It takes longer to save money for contingencies, and building such funds takes work. Therefore, you need to be careful and know where and when to spend your emergency fund.
Here are ten situations in which you can consider using your emergency corps.
Loss of job or reduced income
If you lose your job or experience a significant drop in income, you may have to rely on your emergency fund to cover your expenses until you can find new employment. Having at least six to 12 months of capital is important to cover your essential expenses. The next step is to find another job quickly so you don’t get into more trouble.
If you or a family member has an unexpected medical emergency, your emergency fund can help cover related costs that are not covered by insurance.
If your car breaks down, you may need to use your emergency fund to pay for repairs or buy a new vehicle. You can use your car insurance, but if the damage is so great that it’s less than your insured amount, you can always use your emergency fund, but make sure you put that money back into your emergency account.
Also Read: Step-up and Step-down Home Loans: Should You Go for Variable EMIs?
Maintenance of the living space
If you experience a home emergency such as Your emergency fund can help cover the cost of repairs if something goes wrong, like a broken stove, a leaking roof, or a burst pipe. People often take out short-term loans for such expenses, but if you have enough emergency funds, you don’t need to borrow money.
If you need to take an unexpected trip, e.g. For example, for a family emergency, you may need to use your emergency fund to cover related costs.
If you’re in a legal battle or are faced with unexpected legal fees, your emergency fund can help cover those costs.
If you have an unexpected bill, it can quickly add to your expenses. Your emergency fund can help cover these expenses.
Deductible household insurance
If you need to make a claim on your home insurance, you may have to pay a deductible. Your emergency fund can help cover these costs.
loss of rental income
If you’re a landlord losing rental income because a tenant doesn’t pay the rent, your emergency fund can help cover your expenses until you find a new tenant.
Life is unpredictable and unexpected expenses can occur at any time. Your emergency fund can help cover these expenses, e.g. B. the wedding of a family member or unexpected tax debts.
Adhil Shetty, CEO of Bankbazaar.com, says: “During a financial emergency, your budget becomes tight. Therefore, you need to use your fund wisely and not spend that money on lifestyle choices like dining out, vacations, clothes, electronics, etc. You can leverage your emergency fund with liquid instruments such as recurring deposits, fixed deposits, liquid mutual funds, and high-yield thrift accounts. It helps keep your money tied up and grows on its own by generating interest.”
It’s easy to spend your emergency capital, but difficult to rebuild it. You must spend this money carefully to avoid financial difficulties when a real emergency hits you. Your funds must be used to deal with situations where you have no other source of income left.