By Damilola Faustino
If you are one to spend as it comes, and increase your expenses as your income gets bigger, you might want to take a break and check yourself, because you may not have any tangible emergency funds. Simply put, an emergency fund is money that takes care of unexpected expenses you may encounter. Going without an emergency fund is like operating without any savings. Here’s why your emergency funds should be a priority:
Prevent you from accumulating debt
Your emergency fund prevents you from accumulating debt. It can help you cover the things you did not budget for, like car repairs or medical costs. You can use your emergency fund to handle these stressful events and make it easier for you to stay focused. With this, you do not need to borrow to cover expenses.
You forget to include some items in your budget
When you first start budgeting, you may leave out some of the expenses that you need to plan for. Your emergency fund can cover some of these expenses. So when next you are budgeting, you can add those expenses into your budget.
You only have one income
If you only have one source of income, it is essential to have a substantial emergency fund. This can help you get through an unexpected job loss or illness that keeps you from working.
You are self-employed or a contractor
If you are self-employed or an independent contractor, it is important to have a good emergency fund saved up. It is also important to have multiple income streams as the amount of work goes up and down. If you know that your contract may end soon, you should work on building up more money in your emergency fund.
You own your home
When you own your home, you will have to pay for all of your repairs and upkeep. Your emergency fund can help you handle home repair costs and make owning your home just a bit less stressful.
You do not own your own home
If you still live in a rented apartment, then it goes without saying, that you need emergency funds. Hello, don’t you want to own a house and be a (in the Nigerian term) landlord someday?
You live remotely from your family
It can be expensive to travel home, and the costs go up if you need to travel at the last minute for an emergency. It helps to have a good emergency fund saved up to cover the cost of last minute travel see your family.
When you are ill
Taking care of yourself when you are ill may cost a whole lot. If you do not have an emergency fund, you may need to borrow money to take care of yourself. It is even more important if you have a serious medical condition and have to always see a Doctor.