Using an emergency fund calculator is extremely important for more than just the reason of having something to rely on in case of job loss, emergency, or illness. It also helps you understand how financially secure you are at any given point of time. A recent survey by Credit Donkey found that 40% of U.S. citizens have less than $500 in savings and 41% do not have an emergency fund to cover just one month’s expenses. This is a troubling finding that shows how too many in the U.S. are not cognizant and in enough control of their personal finances. There are four points of financial management that each person should assess when using a emergency fund calculator. Making the most of all four of these calculations will provide for a strong handle on monthly finances which is the basis of a strong emergency fund. First, divide your monthly surplus by your monthly income. This means add up everything you spend in a month and see how much of your monthly income is left over. Then divide this number by your monthly income. This number should show you the health of your financial obligations and the amount of money you can invest. Having more money to invest should help provide for more savings. Second, divide cash and liquid assets by monthly expenses. This number will show you how many months you can sustain your household in case of an unexpected problem such as illness, job loss, or an emergency. A good amount of financial experts suggest a ratio of at least six. Having a lower number, or even a number less than one means it may be time to plan for more savings. This is the crux of an emergency fund calculator. As you can see, it requires cognizance of your full financial picture. Third, divide your cash and liquid assets by your net worth. Find your net worth by adding up all your assets and subtracting that number from your debts. Then, divide your total of your cash and liquid assets by your net worth to find the percentage of your net worth that is liquid. If the number is high it might mean you are not having enough financial risk and you should look for more ways to invest enough of your money. This will also provide for more savings. Fourth, divide your monthly debt by your monthly income to find your debt to income ratio. This number represents your credit risk to lenders, and the lower this number is the more opportunity you will have getting loans from lenders. Read here for more details about emergency fund calculator : http://www.finlit.com/tools
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