Is Your Emergency Fund in Shape for Your Emergencies?
I spoke with Catey Hill of MarketWatch recently about ways to better prepare oneself financially for an unforeseen emergency. As noted in her article the true costs of an emergency vary significantly and can derail your finances if you aren’t prepared. According to her research a car accident, for example, may only cost you about $775 out of pocket while a hurricane or tornado may be 10 times that amount. Remember the recent government shutdown? The average cost of job loss to furloughed workers was estimated to be over $28,000.
Most financial advisors counsel clients to sock away three to six months worth of income as an emergency fund to help bridge the cost of unforeseen events. Under most cases that is enough. However, your emergency fund may need a little more scrutiny if you have special circumstances. What if you are underemployed, a temporary worker or find yourself in the gig economy? Your earnings may be more volatile and unpredictable. To safeguard against shortfall, you may need to stash well over six months worth of your income into savings for greater peace of mind.
Life events, too, may spur you to put more aside for contingencies and emergencies. Starting a family or expecting a new baby? You will likely incur expenses you never dreamed of. Thinking of selling your home? Chances are you will need more funds for repairs, sprucing up, decluttering or staging your rooms. You may want to increase your safety net for the duration of these projects. Perhaps a son or daughter has moved back into your basement after college. If you notice the monthly bills are escalating, you might rest easier with more funds set aside for safety.
At Unified Trust we will help you plan for your future and guard against unforeseen risks. We can help you tailor your emergency fund to your specific circumstances. Hopefully you won’t ever need it, but there is great comfort and peace of mind knowing you are ready.
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