Many people do not realize that one of the pillars of financial strength is how solid their reserve funds are. Some may even take this for granted that they overlook the need to continuously sustain a healthy level with contingency fund and they use the money elsewhere such as shopping for the newest pair of shoes or that sexy new dress.
There are a lot of ways to build up your reserve funds but there are a good number of people who are choosing not to. These are the the ones that live “in the moment” that they either feel that financial emergencies will happen to other people and not with them or that they are so assured that what they are earning now will be enough to tide them through whatever emergency may come.
This sentiment echoes the most with the working group who feels invincible because they have a steady paycheck that comes in month to month. They might also have some sort of savings stashed away in piggy banks around the house. But these might not be enough to cover some of the situations that could be affected by unforeseen financial circumstances in the future.
It is possible that the emergency could only be a busted kitchen light in which case a quick drive to the hardware store will solve it. A flat or busted care tire might be a little more challenging but nothing a quick trip to the trusted mechanic cannot handle. But what if it was more than just small items breaking? What if the tree outside the house fell down on the roof?
Or a vehicle accidentally ramming inside your living room parking itself conveniently between the television set and the sofa? Although insurance can kick in, what do you do in the meantime? Theglobeandmail.com even shares that there are older consumers who are finding the need to dip in and reach into their retirement funds simply because they do not have any reserves.
Your reserve funds will be most helpful with these situations
Aside from these examples, here are a few more examples of unique times your emergency fund and rainy day fund would come in handy.
Trying to get out of an abusive relationship
No one got married and aims to be in an abusive state of relationship but it happens. What seemed to be a fairy tale union complete with singing birds on the trees and hot coffee on a cold morning can turn into a nightmare. It can be a deadly game of cat and mouse where you are trying to hide from your abusive partner and figuring out your next move.
Apart from legal proceedings like divorce and a restraining order, you would need enough cash on hand to make it to your day to day activities and your reserve funds would come in handy. This can help you get away from the house, buy necessities like food clothes and maybe look for a new place to settle in as you try and get away from your abuser.
Falling victim to identity theft
Credit.com shared in an recent article on how ingenuity is becoming a trademark of thieves as some are reported to be using the children’s toy Play-Doh to hack an iPhone using the thumbprint feature. These are scary times and consumers need to be on the defensive all the more. If you find yourself a victim of identity theft, there are specific steps that you need to keep in mind like notifying your lenders or bank as soon as possible.
During these times, there is a big chance that your will freeze most of your accounts and you tend to lose access to some of them for a while. It is ideal that you have your reserve funds nearby and accessible to help tide you through the financial need. Turnaround times to get this messed all settled could vary but your monthly bills as well as basic needs will not wait.
Major health concerns in the family
A case can be made when you factor in health insurance into the overall financial need in health related emergencies but having reserve funds to augment health expenses is such a big relief. More than anything else, it lessens the stress that you have to worry about in situations like these. It is one less thing to worry about and you get to concentrate on the that is important which is being beside your loved one.
Your reserve funds will play a crucial role with how work scenarios play out for you in the office. One is when you have a boss that seems to have crept out from the innermost pits of hell. The most logical thing to do is to leave your work and look for another one with the hopes of getting a better working environment.
The second is when you are actually laid off and you lose your job outright and are given that brown box to cram in all your stuff. In both instances, you need to have some cash on standby to help you adjust and look for work. The reason why the suggested amount of funds you need to have in reserves is about six month’s worth of expenses is that on an average, it could take you about the same time to land a new job. This helps ensure that you have the money for the house and basic necessities while looking for a new source of income.
The beauty and elegance of Mother Nature is only matched by its fury when natural disasters strike. The only recourse for mankind is to get out of the way. Sadly, this is easier said than done and there are people caught in the middle of natural calamities. If you fall victim to flooding, storm, or any other calamity, having extra cash would be a great lifesaver.
It can help you and your family get a warm bed at night and food on the table while you try to rebuild from what you lost. This helps ensure that you can continue to function as normal as possible and have the money on hand to buy food, water, clothes and even pay for that room. You get to focus on working your way back up or waiting for insurance money to kick in.
Death of a loved one
There are financial tips that you need to look into to help surviving partners transition into solo parent as smooth as possible. It can be online banking passwords, PINs, and other financially related documents that would help them get access to the family funds. Of course having insurance would mean a lot when the inevitable happens but reserves can still be a big help.
The last thing you need when you are mourning or trying to settle into solo parenthood is to have cash shortage while you settle out the family finances. Your reserves would be a big help and can tide you through these tough times. You get to cover all the basic financial needs of the family while to put together a new budget or simply need more time to mourn.
Your reserve funds is mostly composed of your emergency fund and your rainy day fund that is meant to cover unexpected big or small expenses. There are also specific situations in life where having a dependable amount stashed away for emergencies could mean being able to weather the storm or falling into the debt trap.