The subject of emergency fund has been covered from many possible dimensions, and the discussions will continue in financial world for a long time. Most people agree that emergency fund is not just a requirement for people getting out of debt, but also as a best practice for personal financial planning.
I believe this is one single most important step to a life free of debt, because life never stops, and the unexpected still happen emergency fund comes handy in these times. This is underscored by the fact that sometimes when you make the decision to get out of debt, anything that can go wrong begin to go wrong all at the same time. (a really frightening feeling)
Dave Ramsey’s baby step ONE for getting out of debt is to set aside $1000. According to Dave
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen.
This beginning emergency fund will keep life’s little Murphies from turning into new debt while you work off the old debt. If a real emergency happens, you can handle it with your emergency fund. No more borrowing. It’s time to break the cycle of debt!
Once you are faced with an emergency that requires you to draw from your fund, the secret to stay afloat is to refocus your energy into bringing the fund to the original value.
It gives you a peace of mind– I know a $1000 can feel like a grain in the sand but if you are drowning in debt, a $1000 is a life jacket.
Reduces the stress level– the assurance that you can put your energy into bringing down other debts without worry of what if XYZ happens certainly help lower the stress.
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“Go to the ant, thou sluggard; consider her ways, and be wise: Which having no guide, overseer, or ruler, Provideth her meat in the summer, and gathereth her food in the harvest” (Proverbs 6:6-8).
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Thanks for sharing such great post, according to me there are numerous reasons when we need such emergency funds. By building an emergency fund you will feel more secure because you are prepared for the facing any financial crisis.