Budget Busters – The Emergency Monster

We are all used to emergencies of the financial kind that drops in on us uninvited. Sometimes life seems to throw us a curve ball and you are blindsided; a major repair on the car, on the house, a health issue that may not be covered by insurance, a family emergency that requires money in addition to empathy, etc. Life is not a bed of roses and crisis is a part of our earthly journey. Someone said you are either in a crisis right now, just came out of one, or are about to enter another. Sometimes it comes one after the other like waves at the beach without time enough to pause for breath, at other times it makes landfall after a while.

Crisis, storms, emergencies are whatever fancy name you call it to come to test your foundation. If your foundation is not solid, something will give. If you do not have enough money in your emergency fund, then you may have to resort to borrowing. In some instances, one emergency or financial incident can leave behind long-term damage to some families’ finances. Sometimes this emergency can be self-inflicted, like starting a project without counting the cost upfront, only to find out if had known, you would not have started it, and it is too late to back out.

The best way to handle the emergency monster is to prepare for it before it happens. Every family needs an emergency fund. Insurance is also part of it. Many incidents are covered by insurance – car, household, health, goods in transit insurance, etc. You cannot get insurance when you need it. You get it before the event happens – when you do not need it. In the same way, you do not prepare for war when war breaks out. That is not the time to enroll in the military academy. You prepare for war at a time of peace.

Putting together an emergency fund is one of the desired outcomes of paying yourself first. To avoid having such a sum of money cooling its heels in the bank in idle mode (and stand the risk of being spent), you can move the money into the money market to work for you and grow. Since you may need the money at short notice, you want to make sure the vehicle you choose is such that you can recall the funds within 24 hours.

By having an emergency fund and insurance in place, you can face this monster head-on without blinking. There is one insurance term I love – indemnity. You are restored back to where you were before the hurricane made landfall. You can continue from where you stopped, and continue to make steady progress toward your financial goal.

Usiere Uko is a writer and bestselling author of Practical Steps to Financial Freedom and Independence, Available on Amazon.