As we’ve learned recently, the world can be unpredictable. Take it upon yourself to prepare for emergencies and set aside money for the unexpected, such as these situations that can take a swift toll on your wallet.
Losing your job
Something else we learned recently is that our careers can change at the drop of a hat. The number one reason for needing an emergency fund is job loss, and that scary reality is more widespread now than ever. Whether it be due to budget cuts, downsizing, or a world-wide pandemic, you need to be prepared to take care of yourself and your family if the worst-case scenario becomes a reality.
If you’re in the U.S., you understand the financial toll of an unexpected medical bill, especially if you don’t have great insurance. Some of the most common emergency health-related expenses are cancer treatment, heart disease treatment, and medical care after a traffic accident. These situations can come out of nowhere, even with the most healthy individuals, and having a back-up plan to afford treatment is necessary.
It’s a vicious cycle – you need a reliable car to get to work, but you can’t afford a reliable car without a job. If you depend on your vehicle for transportation because your work is not within walking distance or you have unreliable public transportation in your area, saving up funds in case of a car emergency is vital. You’ll be losing money in the long run if you’re forced to take an Uber or a cab each day, and depending on others for rides can be difficult. Set aside money each month with the help of an online budget tool to be sure you have enough to cover that unexpected flat tire or alternator failure.
The worst things about home ownership are the unexpected repairs and replacements that need to be made over time. They always happen at the most inopportune moments – a broken oven right before the holidays, basement flooding while you’re out of town, a burst pipe before your mother-in-law’s visit. Some home repairs may be covered under your home insurance policy, but many are not, and you still have to worry about a deductible. Make sure you have enough set aside for these scary scenarios.
Alternatively, if you rent, you’re not necessarily in the clear. While your landlord may take care of issues such as a broken water heater or oven, you may not have the protection of rent control or rent stabilization. You could even be evicted because the landlord is selling the property. Moving is expensive, and an emergency savings set aside can help you feel less stressed if this happens to you.