One of the first steps towards financial responsibility is establishing an emergency fund. Many financial advisers suggest putting aside a percentage of your monthly income until you’ve accrued an amount that matches three to six months of income for you. Once you have a fully-funded emergency account, you can continue contributing a much smaller monthly deduction from your paycheck if you’d like that number to grow. When you’ve established an emergency fund, you may be curious about the circumstances in which you’d use that fund. We’ve compiled just a few situations to help you identify when you may need to use some of your emergency fund.
Use Your Emergency Fund for Unexpected Illnesses
Illness is one of the unplanned events that can be most devastating to people. In addition to the huge emotional burden of sickness, the financial concerns can also be overwhelming. While you’re still in good health, establish an emergency fund that can provide coverage for medical expenses. The U.S. carries 140 billion dollars in medical debt, and unpaid medical bills are the largest source of debt sent to collections agencies. Over half of all Americans carry medical debt. Among those in debt, 57% have over $1,000 in medical expenses. When illness hits your family, even a few thousand dollars can help to offset the initial costs that follow an unexpected diagnosis. Receiving unwanted medical news is difficult enough. Building up an emergency fund can help to give yourself financial confidence.
Use Your Emergency Fund if You Or a Family Member is Laid Off
Being laid off from a job is something you can’t always control, but you can control how you plan for it. Your emergency fund should definitely be used in the event of a job loss. While you or your family member is looking for work, you’ll still need to pay rent or mortgage, purchase food, and pay for transportation, medicines, and other necessities. On average, the duration of unemployment lasts for 26 weeks. Being able to cover six months of expenses can provide confidence during an incredibly stressful time. An emergency fund can help preserve your assets as you or your family member finds employment elsewhere.
Use Your Emergency Fund on Unexpected Home or Vehicle Repairs
When a house or vehicle needs repairing, the cost can stretch into thousands of dollars. Often, an emergency fund is the only way to cover these unexpected expenses. While it’s not the most fun way to spend money, necessary repairs can help preserve the structural integrity of a house or the reliability of a vehicle. Repair or replacement also may be needed in the case of catastrophic events such as weather emergencies or vehicle crashes.
Use Your Emergency Fund on Necessary Travel Expenses
Emergencies don’t just happen in your household. There’s also a chance that your extended family may need your help and support in case of unexpected difficulties. If your family lives out of town, you may need to line up transportation and lodging to stay near them if they experience an unexpected setback.
Let SageSpring Wealth Partners Help You Prepare for the Future
While emergencies are always never welcome, there are concrete steps you can take today to prepare for them. Once you have a certain amount sequestered away in your emergency fund, it can remain there until you most need it. If you do not use the funds for everyday expenses, your emergency fund can help to serve as a necessary safety net in uncertain times. If you have questions about other ways to financially prepare for the future, reach out to SageSpring financial advisor to set up a consultation.
