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| Create your Emergency Fund |
A simple definition of emergency fund, it is the account that is ready to use in any case of unavoidable circumstances such as loss of job, illness or any expenses comes unexpected. The common purpose of the fund is to improve financial security and not to buried in debt in case emergency. Emergency funds are recommended to save or put in any saving easily to access such as bank or in cash.
Most of the financial planner or person into financial industry strongly suggest before starting any investment make sure that the individual already created his emergency fund. Most emergency fund are highly liquid and mostly suggested to be in the banks.
As financial advocate for OFW we strongly recommend that the emergency fund must be at least 3months to 6 months of your basic salary. Most personal finance books agree: the first thing you should do — after meeting basic needs, and while reducing spending — is to start an emergency fund. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt, such as credit cards, as a last resort.
How much is required for my emergency fund?
The best amount of emergency fund depends on your status but most of the expert recommends 3 months for the single and 6 months if you are family man or married.
3 months of emergency funds - GOOD
4 months of emergency funds - GREAT
5 months of emergency funds - BETTER
6 months of emergency funds - EXCELLENT
The reason you want to have three to six months of expenses saved up is that the most common reason for the need of an emergency fund is due to a sudden loss of income. If you or your spouse loses a job you still have bills to pay and it may take a few months to find suitable new employment. It is best to plan for a worst-cast scenario so that the smaller emergencies such as replacing the hot water heater that just went out will be easily covered.For those who already have their emergency funds or on the way to completing it, congratulations! You are on your way to achieving real financial peace.
The rule of thumb for investing, before starting any investing make sure you have emergency funds. Investment are more volatile and you don't want to lose money in your investment right? The best way to avoid that potential lost is create an emergency fund.
If you do so, you are now ready for the next level, INVESTMENT!!!
Now, do you have enough emergency fund to start investing?
“A prudent person foresees danger and takes precautions. The simpleton goes blindly on and suffers the consequences.” – Proverbs 27:12
P.S. 1. Bernard B. Anduyon is a OFW based on Doha Qatar and a trainer for OFIE-M ( Overseas Filipino Investors and Entrepreneur – Movement) a group of advocates teaching OFW to start investing and be an entrepreneur. He is also a member of Bo Sanchez Truly Rich Club http://bernard.trulyrichclub.com.
P.S. 2. I’m inviting you to attend our Financial Literacy Talk series every 1st and 3rd Monday of the month at Filipino Community Center Al Thumama Doha, Qatar where I am a regular speaker for Abundance Mindset and Entrepreneurship for Filipino. I am also a trainer of ATIKHA promoting migration issue of OFW and financial literacy both OFW and in the rural area of the Philippines.
If you want a financial coaching you can send email to b_anduyon@yahoo.com
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https://www.facebook.com/OverseasFilipinoInvestorsEntrepreneursMovement
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