Emergency fund? What’s that? You’ve probably heard a lot about how you should have one, but do you know what it all means?
An emergency fund is a special fund into which money is deposited on a regular basis. this money is intended to be used in the event of an emergency only. If you have a regular paycheck, a given amount determined by you is put into that fund on a regular basis.
With no emergency fun, a person or family would have to get along with out the car, or put repairs on a credit card. While this make take care of the immediate problem, that bill will still have to be paid. the more months you have a balance on a credit card, the more you pay in interest.
If there is an emergency, why not just put it on a credit card. Any portion of your credit card bill that you don’t pay each month is charged interest. this is the credit card company’s way of getting paid to lend you money, just as a bank would if you had borrowed the money from that institution. Every month there is a balance on your credit card after you make a payment, more interest is charged. Instead of paying the credit card company, why not have money saved to use instead?
If you aren’t getting a paycheck on a regular basis, you can cut back in other ways to make it possible for you to have an emergency fund. For example, instead of eating out, put that money into your fund. Watch movies at home instead of going to the theater. Put the ticket and popcorn money into your fund.
So when do you use this money? if a vital appliance breaks or needs repair. I’m not talking about a blender. I’m talking about a refrigerator, air conditioner, stove or car. If you have to fly across the country for a funeral, use some of the emergency money. that usually constitutes an emergency. Deaths are not usually planned.
Be sensible. Use the fund when you really need to, not when you want to. these are two different circumstances. focus on the need, and you should do pretty well.
Connie David is a Money Guide. She helps people find ways to keep more of their hard-earned money.For more information: Click Here
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