Emergency Fund - Bliss to Salaried individual

 A wakeup call to all Indians, nevertheless working harder and getting affluent pay checks, concerned about the job Security. 

Do you realize, over the years, there is surge in your financial pay checks, yet you find it hard to run the family without a month salary. Why do we find it hard to run the family without pay check. Indians are very good investors and they perform the regular ritual to  save, save and keep on saving. In the sense, the saving experts should lead comfortable life with no financial worries. On the contrary, they bother more over the financial matters that threaten their livelihood.

 

Understood, pay check helps you to meet your daily expenses and far more money from Salary spent on paying EMIs (purchased property, Cards). EMIs, the headache that is prevalent across salaried population, cant be laughed off. We are not affluent enough to buy property from our pocket, we seek the help of Banks - provides loans and debt paid back through EMIs. We seldom work for the passion or glory, and the sad state, we start to work for the EMI's. Inflation, job losses keeps haunting us over the uncertain future.

Are you the one who is helpless without a month salary?

When you are too dependent on your salary, You are trapped into dog eat dog world, not having amicable relationship with co-workers, using others as your stepping stone to reach your goal and being untrustworthy. 

Simple solution on how to make your ends meet in the absence of Pay check for few months - Without further ado, Start to invest in Emergency Fund - to be not considered as investment fund, used solely for the emergency purposes in the case of job loss, medical emergencies. 

Let me illustrate with an example. Bala is earning 1 lakh/month. Bala concerned over job security, decides to start an emergency fund (a new bank account dedicated solely for emergency). Each month, he invests some amount into the emergency account. Once emergency fund accrued reaches the threshold limit [Here Bala threshold limit is 5 months of his Salary (Salary * 5 months) 100000*5 = Rs.5 Lakhs ], he renounces investing further into the emergency fund. Bala owns a debt and pays EMI of Rs.30000.  Imagine this, Bala loses job after certain period of time. Jobless Bala won't panic, as he can manage his living cost as well as paying his EMI's through his emergency fund during his jobless period. He cultivates positive attitude towards searching for new job in the best companies and takes his time to negotiate the best deal. However, Imagine Bala without emergency fund, would be in state of despair, desperate to search for new job before the next EMI payment. 

Here, the emergency funds is not going to earn you any good returns rather it stays idle in the bank account. But this is your only fund which is in liquid mode. Your properties, Lands are non Liquid assets which can’t be used in emergency cases. Please, keep in mind having Emergency account with 5 times of your salary earns you healthy and safe lifestyle.

Conclusion

We work for the Money. Flip the statement, Money should work for us, else Earned Money is deemed as Worthless. You are the master to your money. Hope this piece of suggestion helps you during financial crisis. 

In case, you need your emergency fund to fight against inflation to lesser extent and also to be liquid, go for Flexi FD plan with no lock-in period. Guaranteed minimal returns.

Thanks for your precious time on reading the article.

Reference: Let's Talk Money by Monica Halan