Life is full of twists and turns. One moment you are flying high in your career or business, the next you are struggling financially and you can barely pay your bills. An unexpected life event can occur at any time and cause a substantial decrease in your income or bring about an unforeseen expense. This is where an emergency fund comes in handy. An emergency fund helps you sail through the financial crisis by allowing you to still pay for the essential bills while you find ways to improve your financial situation.
Here are some of the unexpected life events that call for an emergency fund.
This is one of the key reasons why you should have an emergency fund. Everyone is at the risk of losing a job. It does not matter how long you have worked in the same company, your title in the organisation, or even how skilled you are. Sometimes, companies face financial difficulties and are forced to lay off staff in order to stay afloat. When you lose your job, you can use the emergency fund to pay your bills and other essential expenses while you look for another job.
Health insurance can reduce the cost of medical emergencies, but it does not always cover all costs. This, therefore, means you have to pay for the costs that are not covered by health insurance. If you do not have enough to pay for these costs and you do not have an emergency fund, you may be forced to take on debt to meet the unexpected medical bills. Even if you are relatively healthy with no underlying conditions it is always important to have an emergency fund because accidents or sudden illnesses can still occur and cause a dent in your finances.
Once in a while, your car will most likely develop an issue that will either call for minor repairs or major replacement of some parts. This can be frustrating, especially if you heavily rely on your car to run daily errands or even go to work. Car repairs can be expensive and, in most cases, the repairs need to be made almost immediately. With an emergency fund, you can facilitate the repairs as soon as they are needed without hurting your finances.
Some home repairs and renovations are not necessarily urgent and can be done when the family is financially secure. However, some of them require urgent attention because the health and the safety of the family could be at risk. These include a leaking roof, a flooding basement, clogged pipes, or a broken appliance. The repairs can be expensive depending on the extent of the damage, but with an emergency fund in place, the financial burden will be lighter.
Pets’ Medical Emergencies
Pets medical emergencies can be expensive when you do not have pet insurance. Pets can contract diseases, get into accidents, or require urgent surgery. When this happens, you do not want to be caught off guard as the life of your pet could be at stake. As you budget for your pet’s monthly expenses, always remember to set aside some money in your emergency fund that will cater for the unplanned veterinary visits.
If you live far away from your friends and family, you may be required to make unexpected trips when unplanned events such as death or illnesses occur. Last-minute travels, especially by plane, can be expensive due to the high price of the tickets. Either way, you wouldn’t want to miss important events of your loved ones due to lack of finances. An emergency fund can help you fund such trips without eating into your savings or going deeper into debt by using your credit card.
It can be an exciting thing when your employer transfers you to a new location or when you get a new job in another country. In most cases, your employer covers part of the expenses that are involved in relocating. However, as you settle in the new location, other unforeseen expenses can come up. If you do not have an emergency fund, it can be difficult to settle in more so when your next paycheque is still a few weeks away.
How you manoeuvre through a financial crisis will be dependent on how well you are prepared for it in the first place. When life throws curveballs your way, an emergency fund can help you stay on top of your finances.