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People go for lawsuit funding when no other option is left. Though disasters are situations that may compel you to go for these kinds of funding may never be foretold, preparing for future financial emergencies is one of the best approaches to ensure you are well cushioned should a disaster strike. The question that begs, therefore, is what are those things you need to do so that you are not worried about going for pre-settlement funding should things go south financially in your life and you lose your ability to earn a living? The simple answer is to save an emergency fund.
Emergency fund brings peace of mind
The emergency fund will give you peace of mind when you are on the mountain and will also defend you financially should life take you down to the valley. To set up and grow an emergency fund, it is imperative to have a strong saving culture and ensure that your saving is done with a goal in mind. You are not just saving to accumulate money in the bank, but towards a specified purpose and also with the discipline of not touching the funds unless extremely necessary. With a well thought out emergency fund, you will be shielded from payday loans and credit cards and you won’t have to worry about financial emergencies that distort your life unexpectedly.
How to Create an Emergency Fund in Three Simple Steps
To save for emergencies so that you may not be worried about pre-settlement funding, you must have a very good strategy and discipline when it comes to withdrawing the money. Here are a few tips to help you set up such a fund-:
Define what will qualify as an emergency
If you want to be successful with setting up and emergency fund, you must determine what will qualify as an emergency and which will trigger the withdrawal of the funds. This will give you a good idea about the instances when you may consider getting the funds and it will also instill discipline in you that you don’t rush to that account whenever you think you need some money. Some of the things you may qualify as emergency include sicknesses amongst family members and accidents. Giving a loan to you relative who is in dire financial need is not an emergency or getting the latest model of your car is also not an emergency.
Determine how much you may need to be comfortable
If the focus of having an emergency fund is to avoid pre settlement loans, then you will have to make serious calculations and determine how much you may need until a settlement is reached in the event that you get an accident and you can no longer continue generating income. Case settlement doesn’t happen after a short while and may take up to 24 months to reach conclusion. This implies that a comfortable saving would be an equivalence of your two-year expenses, not mentioning the medical bills and any other contingency you can’t determine beforehand. The ideal way to know how much you should save would be to simply use your monthly income to two years and make this your target. However, you can still check on your monthly expenses and average this for two years then use that as a rough guide. There is really no good or bad way of coming to the figure, but it should be able to comfortably take good care of you for a period of at least two years.
Reduce your expenses and increase your savings
You never know when an emergency might strike and you don’t want it knocking on your door when you are not ready to handle it. As such, it is imperative to accelerate your savings so that you can hit your target as soon as possible. The first thing you ought to do towards this is simply cut back on some of your expenses and channel more money towards your savings. Just look at your spending habit and identify those things you keep pumping money into yet they are not that very important to you.
Clear your debts quickly or reduce your monthly debt payments
Being in debt may be detrimental if you truly desire to be financially secure. If you have any debts you are servicing, you should strive to clear them off before as quickly as possible so that your sole focus can be an emergency fund. Alternatively, you can reduce your debt payment to the possible minimum so that as you service the debts, you are also building your emergency fund. It may not be easy for many people to first clear their debts before they can start saving for emergencies. In fact, many will never clear their debts since they will continue getting into more debt as they clear the previous ones.
Create multiple sources of income
To increase your cash flow as well as the amount of money you can save, think about starting a business or other incomes generating activity, other than your job alone. There are myriad of things you can do, including starting an online based store or selling the skills you currently have on the internet. You may need to do some learning and probably acquire new skills, but it will be worth it in the long run.
Where to keep emergency funds
Since you are not just planning on saving a few hundred or thousand dollars for emergencies, mattresses and shoeboxes should not be where to keep that money. The best place is a savings account in a reputable bank. Think about a credit union or a bank where you can have a checking account since with such, you will be guaranteed of lower fees and the banks will not eat much of your savings.
For that account, you should not get any ATM card or cash cards for it and you should not also link it to the internet or mobile banking so that you can always access the money with ease. The only time you should think about withdrawing the money is when the emergency you had previously specified occurs.