Most people simply do not allocate funds for emergencies like having to repair a leak in the roof, or getting the car fixed and many other emergencies, like temporary loss of job or pay cuts which are very common these days.
There are so many emergencies that happen and the sad thing is that people fail to prepare and save for these emergencies.
In your financial planning, this EMERGENCY FUND build up must be a priority over debt repayments and investments.
Target date for this fund must be made earlier than the former. From the Cash Flow you generate each month, build up at least 3-6 months equivalent amount of expense for this fund. For example, your monthly expenses is about 15,000 Php, then you need to have at least 45-90K of emergency funds.
You have to make sure you put this fund as liquid and as easily accessible as possible. You may use your ATM Bank account for this purpose.
Do not invest this money on jewelries or anything you can pawn as most Filipino overseas workers do. This is a BIG mistake. I repeat, BIG mistake. If you do, you lose two times. First on the value of your money, and second on the interest the pawnshop will charge you.
If you are just newly weds and is planning to have a child, include in your EMERGENCY FUND build up the expenses you will incur in having your first baby. Normally , this is divulged by your OB.
If you fail to build this fund, you will always resort to borrowing and therefore wont be able to get out of DEBT.
That is our next blog.
God bless.
No comments:
Post a Comment