New Year: Time to create an emergency fund
New Year: Time to create an emergency fund. One of the most recurring New Year’s resolutions is saving. But, saving to save, without having a clear objective, is a discouraging task. But, the thing changes, if the purpose is to create an emergency fund. In other words, save money to help you float through the bad times, those that were so abundant last year, who is crouched there, ready to step out to give us a good upset.
Most homeowners have an experience of what it means to save. Since to buy their property they had to give a 3.5 and 20% down payment. It is easy to infer that they know what it means to suffer some deprivation, in pursuit of a specific objective, in this case, the purchase of a home.
What happens is that having reached this goal, new goals emerge. Houses deteriorate, catch fire, are hit by storms, flood, suffer theft, or any kind of calamity. And even though we have homeowner’s insurance, most policies include a deductible, money that the homeowner must pay before the insurance takes care of the protected damage.
That is if a storm damages the roof of the house and the repair of it costs $ 10,000 and the deductible is $ 1,000, the owner of the property will have to take care of the first $ 1,000 for the insurer to fulfill its part. of the contract.
If the owner does not have that money, he must take out a loan. Then, the arrangement will be much more expensive, it would equal the amount of the deductible, plus the interest generated by the loan. A real nightmare.
Indeed, one of the New Year’s resolutions should be to save enough funds to meet the deductible included in the homeowner’s insurance, even if we have to suffer some hardships. It is advisable to familiarize ourselves with the policy, understand it, and know what our responsibility is in said contract.
However, this would be the first step in creating the emergency fund. If we want the savings to be truly effective, we should expand it until we reach the equivalent of three to six months of our fixed expenses. Thus, if another calamity comes, be it a storm, a pandemic, or an unexpected layoff, our lives will not become chaos that prevents us from conserving our greatest investment. New Year: Time to create an emergency fund.