We are not free from an accident, no one chooses to get sick, there are things in life that will just happen. And based on that we can only be prepared. The fact is that we cannot choose when bad things will happen to us, but it is also a fact that we can choose whether or not we can afford to face such situations.
One of the main goals of financial management is exactly this:
To have an emergency fund.
I often say that worse than spending more than you earn is spending everything you earn. This is because in the first situation you know you have a problem and will try to treat it. By Monday, you will only understand that you have a problem when you need extra features for the unforeseen. And it is at these times that one easily gets into a giant snowball.
Some time ago I wrote about the importance of having a financial reserve for emergency or unforeseen situations. Today I reaffirm this philosophy so that you, dear reader, understand the importance of having an emergency fund compatible with your emergency income.
Better to have a debt than to face a cashless emergency
It may seem strange, or even crazy, but that’s true. Having problems with monstrous debt can be better to deal with than going through times of trouble with nowhere to get the financial resources to handle it. By entering a famous “snowball” one can handle it more smoothly, as it all comes down to cutting spending, reorganizing finances and negotiating debt.
But when the problem is an emergency we have to deal not only with the “lack of money” problem but also with emotional problems. Can you imagine how a father or mother feels who needs to spend (without) money on medicine and doctors for a child’s illness? Or even crash the ether car that shell out a significant amount, negotiate with those involved and assess the impacts this will have on your financial life?
Having to solve financial problems is bad, now when money comes with emotional problems the result is like throwing nitroglycerin on the feet (boom!).
What to do to get out of this possible situation?
Perhaps the best option under these circumstances is: prevent. Begin to organize and plan your finances to generate your security reserve, or as some call it: sock.
It may sound cliché, but it all boils down to:
REORGANIZE your financial information to find out how much you are earning, spending and if you are left over, missing or whether the game is tied.
STRUCTURE an action plan that provides the result you want to achieve. If your goal is to create a reserve, the first step is to stop spending. At these times it is painful to stop drinking the famous beer every Friday, but your peace in the future will thank you.
And lastly, GOOD INVESTMENTS . If you want to set up an emergency fund, it is no use looking for a high return investment because the risk is high too and what you need is security. Specifically in the case of making a reservation, give preference to highly liquid investment products such as savings so you can immediately dispose of the money when you need it.