Most people are lazy to make a budget plan. They sit back and enjoy life as it comes. They spend money every day on things that they do not need rather than on things that are actually essential. One day a situation might arise when they will need money for an emergency such as an accident, the treatment of a disease or a loss of job. At this time, they will realize that they do not have any resource to dip into during emergencies. Hence, it is always important to have a budget plan and to include emergency funds in that plan. Here are a few ways to set up an emergency fund.
Calculate your expenses
While making a financial plan, it is very important to calculate all the expenditure throughout the month. The best way to do that is to classify all the expenses in groups. From household necessities to entertainment, every expense should be calculated. Once you have listed them all, analyse the places where you are overspending. Some expenses such as EMIs, groceries, utility bills, and school or college fees are fixed expenses that you cannot avoid. But some expenses such as movies, dinner at a hotel, or shopping can be controlled to save money.
Divide your funds in two groups. Make a list of things where spending will be fixed and then make a list of things where spending can be controlled. A costly TV will give you better picture and sound quality, but first, you have to ensure that your family’s future will not be in jeopardy with that extra expense.
When all the lists are ready, you must go ahead and plan for emergencies. What if you have to deal with unfortunate circumstances such as a loss of job or an accident? You have to always be prepared for such times. Make a fund that can last you for six months comfortably during hard times. Take a medical insurance for your family members too, in case of accidents or treatment of illnesses.
Be dedicated to saving money for these funds. If possible, go for investments that help you save a little extra. Better safe than sorry.