Those are the important points which will help you to know whether your savings are up to par or not.
- Keeping money in the bank is important for emergencies.
- Depleting your emergency savings can put you in unwanted debt.
- Estimating the amount you have saved and asking yourself a few questions can help you decide whether you have enough.
You never know when some aspect of your life might get stuck. You could lose your job, be stuck with an expensive home or auto repair, or suffer an injury that not only puts you out of work temporarily, but also leaves you with a pile of medical bills. Is.
That’s why it’s so important to build yourself emergency fund And keep that cash safely in a savings account. And if you already have some money set aside for emergencies, give yourself a pat on the back for a job well done.
But is your emergency fund enough to meet your needs? Or are you really pushing yourself to save more? Run through these key questions to find out.
1. Can I cover at least three months’ expenses from my savings?
If You Lose Your Job, You’ll Need Money Savings To cover your bills when you find a new one. And so to that end, it’s a good idea to have enough cash to cover at least three full months’ bills, because going from being unemployed to being hired can easily take that long.
To be clear, though, three months is actually the minimum You should be able to spend as many as you can with the savings. Suze OrmanLet’s say, for example, that you should aim for eight to 12 months’ worth of bills in the bank. So even if you’re at that three-month point, you’ll still want to aim higher and save more.
You can manage to cover a minor home repair by deducting other types of expenses. But for a $5,000 repair, you’ll probably have to tap your savings. In addition to having enough money to pay three months’ bills, if you’re a homeowner, you should pad your savings with extra cash to cover expenses like a new air conditioning system or roof.
3. Have I saved enough to cover my health insurance with the deductible?
Your health insurance deductible is the amount you have to pay before your insurance company starts picking up the tab for the bills you’ve deposited. It’s important to have extra money in your savings to cover that deductible, whatever it may be. So, for example, if you have a $1,400 annual deductible, your emergency fund should have at least three months’ worth of bills plus $1,400 if you get hurt or sick.
4. Do I have enough to cover unplanned car repairs?
Just as home repairs can happen out of the blue, so can auto repairs when you least expect them. And so it’s a good idea to pad your emergency savings to cover new tires or brakes, or whatever else might be wrong with your car. This especially applies if you drive an older vehicle that is no longer covered by any kind of warranty.
Having an emergency fund is a step towards providing oneself with the necessary financial security. But it’s important to assess your savings and make sure you have enough. And if not, start making changes to free up more cash to stick with in the bank so you get the peace of mind you deserve.
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