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The words “emergency preparedness” probably make you think of natural disasters like tornadoes or earthquakes. The idea conjures up images of bottled water, flashlights and a weather radio all ready to go in your basement. You know it’s important to have these supplies when disaster strikes. Failing to plan ahead can put newly married couples financial futures in danger. Indiana Investment Watch encourages you to take some of that wedding gift money and create your own emergency fund! They want you to be prepared for all kinds of emergencies, including those that require you to fork over a lot of money. Indiana Investment Watch lists some examples of true financial emergencies:
- Major car or appliance repairs
- Job Loss
- Unplanned pregnancy
- Medical emergencies
An amazing sale price on shoes by your favorite designer is not an emergency. Buying a last minute plane ticket to Vegas for a getaway with your girlfriends is not an emergency. These are splurge purchases that come out of your regular budget and that budget should include a plan to build up an emergency fund.
So what exactly IS an emergency fund? It’s money you set aside to protect you from financial disaster by absorbing risk. We can’t predict when emergencies will come our way, but we can guard ourselves against going broke as a result. Think of your emergency fund as an insurance policy that you create. You want to build it to the point where you are COMFORTABLE. This fund should help you sleep soundly each night knowing that you and your family could endure a substantial and unexpected financial burden.
The size of your emergency fund depends on your unique situation. To give you a ballpark figure, take a look at your budget and determine how much you need to maintain your current lifestyle for three to six months. If you have children or are the only source of income in your family, you may want to lean toward six months worth of living expenses. Again, this fund should provide you with some peace of mind. Save as much as it takes for you to feel secure.
Finally, your emergency fund should be “liquid.” That means you have easy access to your money. This ensures you can get to it quickly if chaos strikes. Unfortunately, that easy access is a terrible temptress for some of us. Whenever you get the itch to spend this money on something that is NOT an emergency, just take a second to think about the importance of having that safety blanket that you’ve worked so hard to build.
For more financial tips, check out other Indiana Investment Watch Money Skills for Newlyweds articles in Circle City Bride Magazine or head to our website www.IndianaInvestmentWatch.com
