No matter how prepared you are, no one knows when life will throw a curve ball at them. When it happens, it is usually accompanied by a host of unexpected expenses, such as loss of income, medical costs, repairing and replacing equipment, or even compensating others for their losses.
Therefore, the financial advisors at The Kelley Financial Group have dedicated their time and effort to helping the residents of Pittsburg, Pennsylvania to prepare for such a situation by setting up and maintaining a dedicated emergency fund.
What Is an Emergency Fund?
In its simplest terms, an emergency fund can be described as readily available cash that has been put aside to cater to any unexpected expenses. The size of the emergency fund can vary greatly, meaning it can be used for minor costs or to cover huge expenses.
Is an Emergency Fund Really Important?
Saving up for something that may or may not happen is very difficult, especially in the current economic climate. Individuals may be tempted to disregard setting aside any money for emergencies, but this is not a good idea.
Even in this difficult economy, there are many ways to save for emergencies, and The Kelley Financial Group is here to help.
How Big Does an Emergency Fund Need to Be?
When all the potential expenses that may come up are grouped together, the amount of money that is required to cover them will seem too much to handle. However, one should remember that it is highly unlikely that all these will occur at once. Therefore, our financial advisors generally suggest at least three to six months' worth of funds to be set aside.
To have a better idea of the size of the emergency funds, individuals should consider the following:
Smaller Emergency Fund
An emergency fund of about three months' expenses should be considered by individuals who are of relatively good health and have limited debts. The cost of living should also be low, depending on the part of Pittsburg they live.
Things such as rent, transportation costs, and family expenses should be easily manageable, and finding a job in the event of sudden unemployment should be easy. Another important thing is that they should have a partner who is financially able to assist in times of emergency.
Larger Emergency Fund
On the other hand, people living under the following circumstances should consider a larger emergency fund:
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Have high cost of living
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Finding a new job would be difficult
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Have dependents, such as children and a stay-at-home spouse
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Their health is relatively poor
These guidelines are not set in stone and individuals are free to set aside a lot more than the suggested amounts if they are financially able to do so. High-income earners and those nearing retirement are usually capable of saving a year’s worth of expenses or more.
Contact the Financial Advisors at The Kelley Financial Group Today!
There is no better time for one to start saving up for emergencies than right now. Leaving such an important decision until it is too late may prove to be very risky. Most often, its costs less to save for an emergency than it does to recover financially from one.
At The Kelley Financial Group, we have assisted many Pittsburgh residents to adequately prepare for possible emergencies and enjoy their lives now as they plan for the future.
This material was prepared for The Kelley Financial Group.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
Six Things To Consider When Building an Emergency Fund
Everyone has different financial obligations they need to consider, so an emergency fund must be tailored to suit those circumstances. The following are important considerations:
Savings Targets
The first step is to have savings targets because this will give a better picture of how much money is likely to be needed. A lot of attention needs to be paid to the individual’s personal circumstances and any risk factors that are involved.
Size of Emergency Fund
Once a general idea of the monthly savings amount has been determined, the next step is to figure out how much the total emergency fund will be. A simple calculation can be done by multiplying the monthly savings by the target number of months. A rule of thumb here is to add a little bit more than the estimated amount to cater for things such as inflation.
Saving Opportunities
Individuals can also meet or even surpass their savings targets by keeping a look out for various savings opportunities, such as tax refunds or work bonuses. While the temptation to use such a windfall on other things may be great, it is important to remember that having an emergency fund is just as important.
Monthly Expenses
Just because an emergency has happened does not mean that regular monthly expenses seize to be required. Things such as bills, rent, and groceries will still be needed, and these should be a part of the savings plan. However, there are some optional expenses, such as eating out, holidays, and buying luxury items, which can be set aside during times of emergency.
Automated Savings
One way help make sure that targets are met is to automate monthly savings. Most banks and financial institutions have these kinds of features that allow clients to decide how much of their income is automatically deducted to cater to emergencies. Automated savings also ensure that the money set aside for emergencies is not accidentally used up for other things.
Financial Advice
When all is said and done, you may want to approach a reputable financial advisor to assist with planning how best to build an emergency fund. Things to look out for when choosing an appropriate advisor include a good track record, local knowledge, and good reviews from previous clients.