4 Easy way to Build Your Emergency Fund

Introduction

An emergency fund is an essential part of personal finance. It will save you from a disaster and any emergency situations, and this emergency fund is a life-saving medicine that will serve you in your worst-case life.

An emergency fund is an essential part of personal finance. It will save you from a disaster situation, and this emergency fund is a life-saving medicine that will serve you in your worst-case life.

Having an emergency fund is like a vaccine that will fight against the disease of the worst financial condition in the future.

Most people in their worst financial condition plan to get loans from their credit card, which will turn the situation even worse. So, this article will help to build your emergency fund and avoid taking any kind of risk that may become your biggest enemy in the future.

You may be a student, or a worker emergency saving should be considered an internal part of life.

In America, the average pocket money of a teen is approximately $19 to $20 per week, which is enough to start an emergency fund.

You may save it through a mutual fund or the bank. That is up to you, and we will discuss it further in this blog.

We will guide you on the topics like what is the best practice to protect your money, the role of a financial adviser in your emergency fund, and how setting a clear goal can make you rich and avoid any sort of worst situation.

Setting a financial goal 

Setting a clear financial can be the first step in your emergency fund; in recent studies on Americans, it is found that 50% of Americans have just $500 as their saving or emergency fund, which is way less. Because the cost of living in the United States of America is high when compared to any other countries like India, Pakistan, and Bangladesh.

Countries like India and Pakistan do not need any high emergency budget like the united states of America because their cost of living is too low and can be managed with fewer funds or savings in their bank.

How much emergency fund should you have?

Financial experts suggest that the emergency fund should be at least three months or six months.

This is because when an individual does not have a stable job, then should have emergency savings that will help an individual pay his EMIs and other bills.

An average monthly expense of an American family is nearly $3000.

Let’s assume that your monthly expenditure is $3000. Then, as per the financial experts, you should have nearly $9,000 to $18,000 as an emergency fund that can help you for nearly three months to 6 months.

Based on Countries, this emergency fund may get differ as the cost of living is different in different countries.

Importance of setting a financial goal

Setting a Financial Goal is very important as it will save you from any emergency. Not only individual will they get many benefits, but also families will also be benefitted.

Let’s take the situation of covid; in India, the Covid lockdown was announced without any prior notification from the government. As a result, millions of families were affected, and those low-income families with no emergency funds got into the worst situation. Hence it is proved that if emergencies education campaigns were created effectively, then the case would be must better than it was before

Emergency saving will not only save you from the worst situation but also motivates you to be positive and work towards your dreams because most people, not only in the united states of America but also in other parts of the world, think of the situation as what if their job suddenly affected.

How to build your emergency fund

You can follow these steps to build your emergency fund if you are not aware of building your emergency saving in any part of the world. These tips will help you build your healthy emergency fund.

Reduce Unnecessary expenses

Review carefully all the expenses which are not mandatory, like subscriptions to OTT platforms.

If you need clarification about how to review your unnecessary expenses, then try out some apps which will track all your costs and give you a rough idea about saving money and other things.

These expense apps will get data like your monthly salary and costs, or you can update one by one daily expenditures on some apps. At the end of the month, you can display and analyze where you have made unnecessary expenses.

Increase monthly income:

Without promotion, it is hard to increase your monthly income, so you can go for the second income, i.e., passive income. There are many ways to generate a second income. But first, you need to acquire a skill that will be the path to achieving your second income.

Let’s say you want to earn from blogging. Then you need to get some skills like How to do SEO, write content, how to create a website and skills related to blogging.

If you want to earn from youtube, then you need to get some skills like how to be a content creator, how to research a topic, and how to be a video editor.

Sometimes second income can overtake your primary income, which can be a huge milestone in your financial freedom. So learn some skills and increase your income so you can fund your emergency savings.

Start small and grow big.

Building an emergency fund is not a cup of tea. It takes time, as the emergency fund is going to be at least six months, you need to add a small amount initially, and gradually this small amount will turn into a considerable amount that will finance your life in the six months.

You don’t need to add an amount every time you get money or a salary. It is always advisable to keep your goal small and add an amount only when all your expenses are over.

You don’t need to add an amount every month to your emergency fund, but it is wise to save some money. If you can add, it would be a good and best way to increase your fund savings gradually.

Best practices for managing your emergency fund effectively

I personally believe that the following tips will definitely help you in the best way to manage your emergency fund account.

Emergency fund in a separate account

Sometimes, if you consider your emergency fund and personal expense account in a single bank account, you will need clarification on which fund you use while you do personal expenses.

So, opening a separate account for an emergency fund is always advisable.

A separate account for the emergency fund will ensure that the amount goes out of the bank account when it becomes an emergency.

Easy emergency fund accessible 

You should keep this in mind while saving your money that it should not be illiquid. i.e., When you need money in an emergency situation, then the access to the emergency fund should be in such a way that you get your emergency instantly.

Keeping your money in a separate bank account will not beat inflation, but the only advantage it has is that you will get your money instantly in your hand when you need it the most.

Monitor emergency funds periodically.

Regular monitoring of emergency savings can make your account more efficient, and you can review all your funds and adjust accordingly.

Another advantage of reviewing your fund is that you can increase or decrease the fund in your account so that you take control of your savings and take this account towards your goal.

Avoid using the emergency fund.

An emergency fund is not a type of saving account in that you can make money any time you want. It should only be taken when you really need money, like you lost your job or need to pay an emergency bill that you cannot miss to pay.

The Role of Personal Finance Advisors

Personal finance advisors are the ones who help an individual build their personal emergency fund and guide them through every stage of building it. Let’s see some of the services provided by a financial advisor.

Develop a plan

Financial advisors discuss important topics on how to build a good emergency fund and help you in every step so that the fund can be raised effectively.

They will advise you on your expenses and how to save money in the best way so that you do not need to sacrifice your dreams.

Offer investment advice

Another way personal advisers make money is through advice on every fund, whether it may be an emergency fund or any form of fund for the future. They suggest some good plans to invest in so that the emergency fund can grow effectively.

Provide support and guidance.

Personal advisors provide its client with support and guidance and also help in tracking their fund portfolio.

The advice on how to handle any kind of situation in case of an unexpected situation and will recommend the best way to tackle the situation.

Not only this, but they also provide regular assistance to their client to achieve their goal as fast as possible.

So, choose your personal financial advisor carefully to get the best result for your emergency fund.

We would like to recommend that an individual should only go with the best and most trusted personal financial advisor.

To choose the best one, you can get help from your family or read some reviews online because most people research online before they opt for any advisor.

How much do personal finance advisors make?

Personal financial advisors provide a lot of Knowledge to the client in building their emergency funds. It is based on their experience in the field as well as the Knowledge they provide matters the most.

An average financial advisor earns an estimated $90,000 dollar per year.

Factors That Determine a Personal Finance Advisor’s Salary

Experience, Knowledge, and Client base are the key factors that determine the salary of a financial advisor’s salary.

Experience is the important key not only in the financial field but also in all other fields, which will improve the expertise and Knowledge in their respective field.

The client base is the other factor that drives the salary of a financial advisor. It is also very well known that the location of a client is also a key factor. As the cost of living is different in different countries, the fee may differ from country to country.

Conclusion

An emergency fund can be a great saver when some unexpected expenses arise at a time when we don’t have enough cash in our hands.

Financial advisors can help an individual to a great extent in creating a highly stable and efficient emergency fund.

One must follow the steps advised by your personal financial advisor to create the best fund as per the individual condition.

One of the great advantages of having a financial advisor is that they plan a fund keeping the conditions like salary and other factors.

They deeply analyse your expenses and income and create a report on the best emergency fund tailored for you.