Have you just experienced an unexpected financial emergency and did not know what to do? Do you prepare for financial emergency? How do you prepare for it? Emergencies can push anyone’s finances over the break, this is why emergency fund are the foundation of financial health but a lot of Filipinos are still living to pay day to pay day and when panic strikes it is easy to make things worse.
We all know it is important to have an Emergency Fund, but how do we know what really creates an emergency? An emergency would be something that cannot be planned for or expected. Whether it is a medical, educational expenses, job loss or unexpected loss of income, an emergency home repair, a normal maintenance or repairs for your car, an unexpected change in your financial position can be really stressful. The bills still need to be paid, the utilities need to stay on, and you need to put food on the table and a need to maintain the standard of living of your family, so how should you deal with a financial emergency.
The first rule in being prepared for a financial emergency is not to use your emergency resources except for emergencies.
This may seem a lot like common sense but ignoring this first rule is what caught a lot of people flat-footed in the financial crisis. The had already maxed out their credit cards, drawn their home equity line of credit, and borrowed against their retirement plan so that they had no reserves left when they lost their jobs or otherwise saw their incomes drop.
Determine what caused financial emergency
Take a moment to sit down and cautiously evaluate your situation. Running around in a panic would not solve anything and only lead to additional stress. Reasonably, you have a thousand things running through your head and being cool and collected is the last thing on your mind, but the ability to carefully evaluate your situation will ensure you make the right choices.
First, determine what caused this financial emergency. Before you can look at ways to resolve the situation, you need to understand the cause. Is it a sudden loss of income? Mounting expenses that you cannot keep up with? Or, caused by a natural disaster? While each situation can lead to similar burdens, your plan of execution will likely need to address the root of the problem to be effective in the long run.
Prioritize Expenses
Not all expenses are created equal. There are certain bills that need to be paid before others. Some of the most important items to put at the top of your list should be utilities, food and shelter which are the human basic need. Is it possible for a foreclosure to keep your cable bill current? Yes, it is possible. But the crucial question is, is it worth risking? Obviously, it is not. So, you have to be careful in examining all of your expenses and determining which is the most important.
It is not worth paying something that will put you in jeopardy of being unable to pay for a necessity. Once you are established which bills are the most important, you can begin looking for expenses to cut out of your budget. While it might not be much fun to cut out some of the things you are used to, it might be what is necessary to keep you from slipping into an even deeper financial hole.
Look for ways to cut back or eliminate things completely. If you regularly go out to eat, consider cutting back or eating at home entirely.
To determine the amount you should be in your emergency fund, total your monthly expenses and then multiply by the number of months that you want to be table to cover should you lose your income. For example, your expenses per month is 10,000 pesos per month, you should build an emergency fund of at least 30,000 pesos so that you can pay all your bills and expenses for 3 months. 3 months is the minimum amount you want to set aside. Most financial experts recommend having funds to cover 6 to 12 months of expenses, and in today’s economic climate, that definitely sound like wise advice.
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(The writers are both Wealth Analysts of a reputable Financial Company and are both active Licensed Real Estate Practitioners. They also engage in Stock Market Investing. For suggestions and more details, you may contact them with CP # 0919-376-2922 or Tel.No. (074) 244-4026.)
