You have probably heard it before: you need to save money and set financial goals for yourself to keep you out of any financial trouble. In this day and age, you cannot just leave things to chance. We all know how that mentality worked for us when the recession hit. Some people lost possessions that they worked so hard to own. Others were forced to give up the lifestyle that they led to adapt a more restricted one.
Most of us got into so much trouble because we were not financially prepared for emergencies. This is something that we have to change because we cannot be caught off guard anymore. One economic crash can wipe away the years of hard work and leave you with nothing to your name.
What happens when you do not have a reserve fund
Financial experts will always stress the importance of having an emergency fund ready to help when the unexpected strikes. We cannot determine the future and given that, it is so much better to be prepared for any eventuality – just in case.
If you do not save up for the future and disaster strikes your home, here are some of what we assume will happen to you.
Provides unnecessary stress
When you have an emergency situation, you are already stressed because our body is preparing itself to either fight back or flee from the situation. That anxiety will be heightened when you realize that you do not have the capabilities to fight or flee. If the situation is not relieved immediately, you will be subjecting your body to that kind of stress for a very long time. That can prove to be very dangerous because we are not meant to endure a prolonged state of anxiety. It could lead to all sorts of health issues that is topped by heart problems.
Having no emergency fund will divide your already stressed concentration. You need to work your way out of the problem while finding the means to help you accomplish that. If you already have the funds in the first place, you don’t have to worry about that. You can go straight to solving the problem immediately.
Forces you to borrow money
If you really need the finances to get you out of a tight fix, the lack of savings will force you to put yourself in debt. You have to borrow money to pay for that emergency and that will only make your situation worse than it already is. Even if you solve the emergency, you still have the debt problem to deal with.
Creates discord among loved ones
Lastly, and probably the scariest is how it can create discord between couples and families. Sometimes, a financial problem will lead you to blame one another – especially when you are forced to make sacrifices just to get out of the situation. In fact, a lot of divorces are filed as a result of a financial crisis.
Of course, the government has a lot of foundations and financial aids in place to help citizens in times of need. The website Benefits.gov will give you an idea about the different programs that you may be qualified to apply for. However, think about it this way – in case the emergency happened to a lot of people, do you really want to fight your way to get that financial assistance? It may be difficult to get the help you need if you have to fall in line to get it. By the time you get the approval (if you qualify at all), it may already be too late for you.
Benefits of being financially prepared
All of the effects we mentioned are just a few of the things that you could experience. If you are not careful, an emergency can really ruin your life. Here are several reasons why you should start saving and why you should do it now.
Financial security. The obvious reason is financial security. You want to have the security that you can pay for any unexpected expense that will come your way.
Peace of mind. Since you know that you have the finances to pay for an emergency, you can enjoy the peace of mind that comes with that security. It will keep you from worrying about what you have to do and just concentrate on solving it.
No need for debt. The last reason is to keep you from putting yourself in debt just to get out of the emergency situation. You don’t have to rely on others for financial aid because you have prepared for it in the past.
Just like the medical industry believes that prevention is better than cure, your emergency fund will prevent you from future financial blunders and situations that can ruin your life.
Here is a video of financial expert Suze Orman discussing the fundamentals of an emergency fund. She specifically discusses how much you should be targeting in your reserve fund it can help you through any type of emergency situation.