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People around the world are panic by ongoing economic recession. Even experts including legend investors saying, this will be a long recession compare with any similar previous same kind.
People running by driven with panic to shield from any possible personal financial crisis and maintain present living standards in case of possible job lose. Those who have acted intelligently at there best time, by seeing such future financial issues, not worrying because of the immediate availability of enough funds to meet any requirements for a specific period of time they have calculated, enough to find any parallel solution to stabilize there life.Those who are not acted intelligently to shield themselves, at the best of there time or never taken any action to keep there life standards intact incase of any severe future financial issues, are heavily panic. They should think and act for the requirement of creating an enough and well accessible emergency fund now. If you have little thoughts, you can easily raise required amount as your emergency fund. Below are the possible solutions for that.In my various previous articles, I have given practical ideas and various methods to save money from your each action like shopping, credit card usage etc (see the links below). As a preliminary steps to raise an emergency fund, you have to decide the time to recover incase of any issues like job lose or other severe financial problems. In my personal opinion and practice, an emergency fund should be equal to your 6 months salary that should go to a separate account. This practice help you to survive next 6 months without any worries incase of any job lose or financial issues and free from such worries will help you to point for searching a better job and find one within this six month.
As a thumb rule to calculate one month expenses here is the solution:
• Identify and add your minimum monthly bill amount: This can be rent or mortgages, credit care or personal loan repayment installments, utility bills like electricity, water, internet, phone, house services, newspaper etc. also identify the services that you can cancel with one month notice like cable TV, club membership etc..
• Identify any possible premium paying month included with this six months and that cannot be avoidable. If such, identify the premium that you should pay for your health insurances, medical, term policy insurance, home, vehicle or any other insurances, SIP for mutual funds etc. You can add any other mandatory expenses like school fees, taxes etc..
• Add all routine monthly expenses like groceries, car fuel, possible medical expenses to self or family members if not protected by insurance etc… you can take a minimalist approach here by reducing your budget if willing.
• Add the required job hunting expenses. This will include the travel expenses to out of your present states, location expenses like food and stay if required etc..
Now you are with an exact figure of possible one month expense. As I mentioned the emergency fund should be equal to your 6 months salary, multiply one month expense with 6. The total of this sum will be your emergency fund.
Once you have identified the amount required as emergency fund, here is the method to work for the fund:
• Decide how much amount you can save.• Calculate your present monthly expense. A proper budgeting with writing down all your monthly expense for 2 or 3 months will give you and exact idea about the average monthly expense. Write the extra cost, that is not a part of your regular monthly expense, separately.• Open a separate account and start adding your savings to that. As a thumb rule, never touch this amount.• Identify the possibility to save little more at each time. This will help you to identify possible cost reducing methods.• Setting up an automatic deduction from your salary account to the emergency savings account is a best practice any one can follow.• Reduce any unnecessary expenses like magazine purchases, eat out, recreations, club memberships that you are not using for long term or any other facilities that presently you are paying money as rent but originally you are not using. You can save such amount to your emergency fund.• Try to pay off all your bad mortgages like credit card, personal loans etc… This will put you a very safe side and you will get lots of money to safe and achieve your emergency fund as early as possible.• Utilize the possibilities of get any kind of reductions to your required items.• All the above, if you have a secondary income, never touch this and add this total amount to the emergency fund account till achieving your targeted amount.
You can identify various savings possibilities from your daily life. Read a possible savings from your bad habit, here is an article on the savings possibility from shopping habit, here is an another article on how to save money from your credit care purchases etc… like this, identifying yourself will give you lots of opportunities to save little by little.
Remember, little pain in the beginning will give you more relax and happy to life. There ate 2 tested happiness in our world is, a debt free life and a life not worrying about future. If you will and work a little, you can achieve both. Shielding your family and yourself to any possible financial issues will give you confidence and free mind from all the worried thoughts to act properly for identifying and achieving better opportunities for settle your life in a far better than present. Best wishes to all those who reading this article.If you found anything important points missing or required me to have an attention to anywhere in this article, please feel free to comment or contact me using my contact form in the top menu.