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Have You Got A Safety Net?

As we go through life, we often come across unexpected money challenges such as car repairs or emergency medical bills. To handle these situations, it’s important to have what is often called an “emergency fund”.

The money that you have set aside can act like a safety net, ensuring you recover quickly from unexpected expenses, as well as helping you to stay on track with your bigger money goals (like getting out of debt, through debt review).

What is An Emergency Fund?

An emergency fund is simply money set aside for unexpected things, like car or home emergencies, or when you suddenly have less money coming in.

While in debt review, these emergency funds are super important because without it, even a small money problem can force you to drop out of debt review, and that can lead to long-lasting money troubles.

How Much Should You Set Aside?

Figuring out the right amount to keep in your emergency fund depends on your unique financial situation.

You obviously can’t keep a mountain of cash around when you are focusing on paying off your debt, and living on less.

One way to estimate this amount, is to recall previous surprise bills and how much they cost, and then use that as a way to set a goal.

Even if money is tight, starting with small, regular contributions can give you a sense of financial security. Your Debt Counsellor will have advised you to save a little in your monthly budget. If you are not sure what to set aside or how to manage, then feel free to ask them for advice.

How To Do It

There are a bunch different ways to build an emergency fund, but they all come down to the act of putting some money aside in a savings pocket, or a separate bank account and not touching it until it is absolutely necessary.

Once you have paid your debt review instalment for the month, immediately take some funds and move them into your emergency fund.

Tip: Don’t wait till the end of the month to see if anything is left over… there won’t be.

If you regularly do this, then when that rainy day does come, you will have a cushion to help absorb the blow. Even if what you have saved is not enough to cover 100% of the extra cost, it will help you cover some of it, while you make a plan for the rest.

An emergency fund can help you keep your financial future on track.