Nobody really likes to think about being in an emergency situation. However, unfortunate as it might be, emergencies happen to everyone. These financial emergencies could come in any form – it could be an injury while playing cricket or football, losing your job, or even a natural calamity of some sort. Though it is hard to prepare for every situation, the best thing you can do is to build an emergency fund for any such unforeseen events.
I have multiple investment plans active.
Why do I need a separate emergency fund?
It is only when when most people fall in financial trouble do they realize that although investments can help you gain wealth, they don’t really help much in the times of a financial emergency.
As per financial planning standards, ideally you need to have easy access to 6 months worth of expenses for it to be considered a good emergency fund. But in today’s day and age, with expenses and investments being sold to you at every tap of the screen, how do you build this emergency fund?
Understand your expenses
Start by noting down all your regular monthly expenses including the rent, electricity bills, phone bills, debt/EMI payments, daily personal spends, commuting costs, monthly investment payments, and so on. Let’s call this total figure ‘Expenses A’.
Once you have covered your regular monthly expenses, add up all your occasional extra expenses like entertainment costs (going to a restaurants, movie nights, etc), maintenance/upkeep spends, and any miscellaneous expenses. Let’s call this figure ‘Expenses B’.
Finally, list down any expenses that you need to incur every 3 or 6 months. For instance, you might have an investment scheme that you pay premiums for every 6 months. Or society maintenance fees that have to be paid every 3 months. Total these amounts for a period of 6 months. Let’s call this figure ‘Expenses C’.
Now, to arrive at the value of your Emergency Funds for 6 months all you need to do is:
Emergency Funds = (Expenses A x 6) + (Expenses B x 6) + (Expenses C)
Now if you’re like most of us, after paying off your monthly dues and expenses, by the end of the month you’re barely left with any surplus money. So it would seem like building an emergency fund can take years, but what if you face an emergency before you’re ready? Does it make sense to stop your current investments and divert all available funds towards this emergency fund? Of course not.
Then how?
How to build your emergency fund, fast
Let’s think about this for a bit. Every month you are only able to save a fraction of your monthly expenses, and at the same time want the fastest way to save up for six months worth of expenses. What you’re looking for is a tool that lets you start saving small, but at the same time allows you to borrow a much larger sum, before you have managed to save up the entire amount.
Luckily for you, we have exactly such a financial tool for you. KyePot chit groups are designed especially to help you achieve your financial goals and are perfectly suited to help you build an emergency fund.
Let’s say your target is to save Rs. 1,80,000 for your emergency fund. To build this Emergency Fund in less than 30 days, all you need to do is join Piggy Bank 2.4L, a KyePot chit group, where you need to save just Rs. 10,000/month. And within 30 days, you have access to Rs. 1.70L – 2.28L in case you need to borrow it. It’s really as easy as that! (Learn more about how it works)
And there’s more… you earn monthly dividends with every payment, making this the only financial tool that allows you to save, borrow, and earn!
Comment(s):
Posting guidelines
Lets keep the conversation constructive and insightful. If you wish to comment on this post then just provide your name and email address. Do remember that promotional, mean or off topic comments will be deleted. All postings will become the property of KyePot Pvt. Ltd.