A New Year is the perfect time to make resolutions for the year and one of the few initial steps in the Financial Planning process involves taking care of unforeseen risks.
Create an Emergency Fund
In today’s uncertain job market, a lay-off can lead to months of umemployment. A serious illness or disability due to accident can also hamper one’s ability to earn for a prolonged period. When life throws nasty surprises your way, have a Plan B ready.
In the absence of an emergency fund, one may have to either borrow from friends, relatives or take a personal loan and service it by paying interest.
How much should I save for a rainy day?
One should be keeping at least 3-6 months of their expenses as their emergency fund. Also choose an appropriate investment option like money in Saving’s account or a Liquid Fund. Remember returns are not important here. What is more critical is that the money should be easily accessible at short notice.
Cheers to a New Year and another chance for us to get it right.