Warning! Maintain Safe Distance Between Emergency Funds And Impulsive Self

By | March 4, 2014

You’re young, you’re ambitious and boy, are you raking in the big bucks! You’re as successful as a rambunctious twenty year old could possibly be or maybe even more. You don’t shy away from the big expenses—whether it’s to buy a bigger apartment or a bigger flat screen television! You’re quite the impulsive spender, but hey, you’ve earned it. All those late nights prepping for tests and then impressing your employers with your skills have finally paid off. And you’re not going to let anyone rain on your parade!

Let me dampen your excitement if you’re one of the above people that I just described. What if I told you that you might be playing the biggest gamble of your life if you’re doing just that? Sure, you’re earning quite well today. But what if you never got the promotion that you thought you deserved? Or the economy crashes again? Or worse. Something bad happens—not like spilling chocolate milkshake on your favorite shirt bad, but something seriously bad bad. In an emergency, you’d need those savings that you so lavishly spent on the latest IPad. You should always, and I mean always have an emergency fund and I’ll tell you why. Here are my reasons:

Ipad

1.     It’s an important step in financial planning

Imagine you’re a trapeze artist. You love your job. It’s exhilarating and wows your audience. But you’re doing it without any safety nets. What if one day your hand slips? There will be absolutely nothing you can rely on, right? Well, that’s going to be your situation if you suddenly lose your job, or have to deal with immediate emergency expenses that you cannot put off. It’s going to be a free fall straight into financial disaster. You should avoid that scenario and always plan for the worst. That will reduce chances of you using that evil credit card or take a loan from the banks with a crazy amount of interest that you cannot possibly pay off. Financial planners suggest that you save up enough money to help you glide through three months of living expenses in your emergency fund.

2.     Be smart and open a savings account

The easiest thing you could do is open a savings account with the stipulated amount of money that you plan to save. You could give the bank the option of automatically cutting out a certain amount from one account to another to ensure that you don’t chicken out of regular savings. It will help your emergency fund grow and help you out financially when you’re in need of it the most.

3.     Some insurance policies may help during emergencies

There are also some insurance policies that you could get for specific types of emergencies. Now this conversation is about to take a bit of a morbid turn. Yep. I’m talking about someone’s untimely demise. When that happens, there’s a whole lot to be done besides grieving and that can be awfully taxing on any family member. There are expenses to be dealt with such funerals, outstanding medical bills or legal fees. If you don’t have life insurance, death can be a pretty expensive affair. At this point in time, you would need something called the final expense insurance. It’s like a whole life insurance policy, but with much lower premiums and specifically suits those of you who are deemed too high risk for a life insurance company. It’s the type of emergency fund that you would need because you never know when the grim reaper strikes and your loved ones won’t have to be too worried about finances.

Continuing with the morbidity, another type of emergency fund could be disability insurance. Imagine if something happens to your physical being and you are not able to earn for a couple of years? You can’t take your health for granted. If you have disability insurance, the insurance company will make those important payments on your behalf. If insurance policies confuse you, nowadays you’ve got aggregator websites like accuquote.com, selectquote.com or intelliquote.com to give the best quote from the best companies. You can always do with a good deal, especially when it comes to your emergency fund.

4.     Don’t give in to your impulse

You might be a believer of carpe diem. But you don’t want to be using the emergency fund that you’ve saved up so hard for silly materialistic things. You might think it’s stupid now—saving up for the future *scoff* who needs it? You will! Because you never know when things can go wrong! It’s better to be safe than sorry—they didn’t make this proverb for giggles, you know?

I’ve given you my reasons to why you should have an emergency fund. Life can seem pretty good when you’re young, but I cannot reiterate more that it can get really bad really fast. You might just want to cushion your fall a little bit. And when that day comes, you’ll thank me for convincing you to make an emergency fund.

Elvis Donnelly is a father of two who works from home and lives with his wife. He is a voracious reader and likes to keep abreast of current affairs on personal finance, technology and innovation, and takes a keen interest in environmental issues. In his spare time, he loves taking on home improvement projects and considers himself a closet chef.

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