How do you make your financial emergencies go away?
Wait.Let me guess…loans?selling your car?withdrawing your savings?Well the list may continue forever according to you.Not everyone pays for emergencies that way but if you do,you are in deep trouble and I have to remind you a couple of things.
As I’ve discussed about the rainy day fund in other sections,you are now familiar with what it is all about.The main lesson of this article is to give you an insight into why other options other than an emergency fund,are toxic to your financial growth.Still with me?Great.
We better get to it already;
1.Relying On Insurance
Hey,hey,hey that sounds like you?Of course it sounds like most people.We pay for insurance and depend entirely for it’s coverage.But what we do not keep in mind while relying solely on that is;
-It mostly covers partially and we still have to chip in something..where does that something come from?savings?..bad,bad idea.
-Your insurance claim may be denied.We all know that happens alot,far from what we expected..yeah life is that cruel sometimes.
There are some turn of events during financial emergencies that you didn’t anticipate so you can’t expect to insure yourself out of everything.Instead of paying every electronics insurance,drop that cash in your emergency fund and get ready to be covered.
When in that financial tight spot you may be thinking..maybe I should sell that stock and fund this emergency.Yeah I know how hard times can stress you out but then in the process you lose future profits,you may incur losses and that’s another step back on your personal finances.Is that really fair?You don’t want that so if it’s creating an emergency fund, the time to start is not tommorrow..it’s now.
3.Use of Credit Cards
Here’s the easy way many people seek financial refuge.You don’t wanna go there,or rather you don’t have to.Are you risking your credit score?You would rather pay more than you have to?And those interests get really high you can’t imagine looking at your money in the eye.I do not need to say further…we both know the major risk you are taking while you can simply create an emergency fund and build your finances instead of crushing them.
4.Family And Friends
Here’s where my emergencies were always directed to.I know you can relate.As soon as I would face a minor financial crisis my phone is on speed dial to my parents.At a certain time I had huge debts and emergencies filling my plate.That’s when I stopped and started thinking about my overall financial life.It was exhausting thinking how financial dependent I’ve become.I had to decide whether to postpone my spending recovery or start getting a grip of my financial life by saving from that second.It was slow and really hard to sacrifice my wants to start building an emergency fund.It still feels like the best decision I ever made regarding my finances.You feel good when you know if anything happens,people you love may catch a breath because the emergency fund got you covered.
When you save you have to have different savings for specific reasons.If you do not have an emergency fund you would end up using even your retirement savings to fund emergencies.In the process you incur huge losses through penalties,loss that even inflation couldn’t exceed.You definitely do not want that so it’s high time you make a better choice.
Taking loans for emergencies is something many of us do.Acquiring loans to make unexpected problems go away is asking for bigger problems.This is like postponing bigger trouble to feel good for now.
These not so smart ways of getting rid of financial crisis can be avoided if you create an emergency fund.Not so fun at first.. but it’s so worth it.