Imagine you’re faced with an expensive repair on a major appliance or your car, or that you were injured and had to take extended time off work. Would you still be able to meet all your normal living expenses and pay for something unexpected like this?
With many Australians living pay day to pay day, when something goes wrong you may find that you don’t have the extra funds to pay for these expenses while also keeping up with your regular bills.
When it comes to financial management, being preventative is always a good first step.
An accident, illness, an emergency home or auto repair can happen at any time. If you don’t have an emergency savings account for these types of expenses, you’ll have to tap into your monthly budget, which can leave you short on paying your fixed and variable expenses.
While life does happen, unfortunately there are still obligations to pay even if you can’t work or you had to pay something that you weren’t planning on.
If you have an unexpected expense and you fall behind on your fixed costs such as your home loan, car payment, utilities, or insurance to name a few, you may end up having to pay out more money due to late fees and accumulating interest. Along with having an emergency fund in place, another smart move is to have income protection insurance so that if you become ill or injured, you have replacement income that can help you take care of your regular financial commitments.
By having an emergency fund in place, it gives you peace of mind knowing that if something does go wrong, you have funds in place to make sure your bills are still paid on time and you can take care of the additional, unexpected expense. By having this peace of mind, it opens up the opportunity to take some of your disposable income and invest in superannuation in order to help further secure your financial future.
You don’t need to have a lot of money to start an emergency fund. While the general rule of thumb is to have six months of income in the account, even a few hundred dollars will get you started and then continue to add to this account when you can.