A Guide to Building an Emergency Fund!
Tune Mera Golden Chashma Becha! Raju… We all remember this hilarious scene from the movie Phir Hera Pheri, where Raju sells Babu Bhaiya’s golden Chashma because of an unforeseen financial issue. If you remember, at the movie’s beginning, Babu Bhaiya lived a lavish life. Just name it, and he had it all. A big house, a car, a private swimming pool and what not! While living a lavish lifestyle, the last thing he could think of was building an Emergency Fund. Little did he know that just building an emergency fund could save his golden chasma from being sold! His character is the perfect example of how most of us live our lives these days. We enjoy the moment without thinking about what will happen in the future. But building an emergency fund is a must! What is an Emergency Fund? An emergency fund is nothing but a rainy day fund. It is a fund you keep aside for unexpected events in life. And hence this money should be kept in an asset class which is liquid or could be easily converted into cash.
Before an uncertain situation smashes through your window, you need to start collecting an emergency fund. How to Start an Emergency Fund? Solution 1: When you receive your salary, the first thing we all do is create a budget. We note down our spending targets. For example, Rs 12,000 for groceries, Rs 4,000 for fuel, etc. If you carefully analyse, you are first thinking about how much you would spend rather than how much you would save. So, if we were to summarise this situation in a formula, then it would be: Saving = Income – Expenditure Now, let’s look at the formula differently. Expenditure = Income – Saving You will save a fixed amount from your salary every month before spending. Read More About Guide to Building an Emergency Fund