09/19/2013: 6 Reasons You Need an Emergency Fund, Stat
In today’s world more than ever, we have to brace ourselves for the unexpected. An unforeseen change in employment. A faulty car transmission. A major home repair. A surprise vet bill. These are just some of the reasons why it’s important to have an emergency fund of at least six months of your net income…just in case.
You’re no longer employed.
Whether you received a pink slip as part of a round of layoffs, or you’ve resigned because your job was taking its toll, you need savings to pay your day-to-day living expenses until you find another source of income.
You need medical care.
When over the counter treatments and home remedies fail, you may need to go to the doctor, a specialist or even the hospital. Even with solid health (or dental) insurance, you are increasingly responsible for co-pays or co-insurance or faced with limits or high deductibles. Your health is paramount, so having an emergency fund in place ensures you don’t face the predicament of having to choose between rent and your well-being.
Your car leaves you stranded.
Unless you rely on public transportation, your vehicle is your lifeline…for work, for errands, for getting to appointments and more. So, making sure you have the resources in place to properly maintain and repair your car as needed is a great use of your emergency fund.
Your home needs a big repair.
There’s nothing more troubling than a leaky roof, a flood in the basement, or your air conditioner grinding to a halt during a heat wave. While having a home owner’s insurance policy with good coverage is important, remember that certain home repairs aren’t covered, and there’s often a deductible. After all, you need a roof over your head…and one that’s in good condition. With an emergency fund, you won’t have to sweat a necessary repair.
While owning a pet (or two) may bring you great joy and the costs are generally low, what if your pet requires surgery? Many don’t have pet insurance, and even those who do may be faced with thousands of dollars in bills related to the health and well-being of Fido.
You owe Uncle Sam.
Your tax situation can change from year to year. Just because you received a refund in the past doesn’t mean that you won’t be hit with a tax bill next year. And, with many people putting off taxes until the last minute, you may not have much time to come up with the shortfall for the IRS.