Why You Need an Emergency Fund

May 20, 2014

Be ready for any emergency with funds to stay out of debtOne day you’re chugging along, doing okay, paying your bills on time and then without warning, a life emergency comes up and completely derails you, sending you straight into debt. Many of us don’t worry too much about such emergencies because we think they won’t happen to us. However, unforeseen financial crises affect individuals and families everyday. Here are a few examples of the kinds of things that can come up and throw your budget off track:

  • Your car breaks down: Think about how much you rely on your vehicle: you need it to get to work, to care for your family, to get places safely, go grocery shopping, etc. Automobile repairs are often unexpected and have to be taken care of immediately. They are also often very costly. Or, you could be involved in an accident that totals your car. For times like that, an emergency fund definitely comes in handy.
  • You have to make a major home repair: What would you do if your roof received major hail damage, your basement started flooding, a pipe burst or your deck or fence gets damaged in heavy winds? Even with homeowners insurance, not all damages are covered, and some are covered at different levels. You’ll at least have to pay your deductible.
  • There’s a death in the family: Funerals today cost anywhere from $6,000 to $10,000. Even if your loved one had life insurance, it may be months before that money actually comes in, so you’ll need a way to pay bills in the meantime. And if you aren’t responsible for the funeral costs, but you live far away from a loved one who passes away, a last-minute plane ticket can be very expensive.

There are all kinds of other reasons you may need an emergency fund, including job loss, medical bills, moving expenses, cost of living increases, major dental expenses, emergency pet care and more. The bottom line is that an emergency fund would provide peace of mind that if an emergency arises, you wouldn’t be forced to take out a loan, charge up your credit card, or borrow money from friends or family. Start setting aside a small amount every pay period to build up a three-to-six-month (or longer) reserve of living expenses.

Visit @EFXFinanceBlog on Twitter to get more savings and personal finance advice!

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

Leave a Comment