In this post, I will be sharing how to start an emergency fund.
This is related to my previous post, where I wrote about how much do you need for your emergency fund.
How to start an emergency fund?
So, let us start on how to start an emergency fund.
Firstly, calculate the actual amount you wish to have in your emergency fund.
From there, have a proper plan on how and when to achieve your desired emergency fund.
For example, your monthly expense is RM3000. And you have a family of 4 which are your stay-at-home wife, a toddler son and a baby girl.
Referring to my previous post, it is wise to have at least 4 months of expenses in your emergency fund.
So, 4 months of expenses x RM3000 = RM12000.
If you start from zero, give yourself about 1 or 2 years to achieve the amount.
In fact, it is not recommended to spend more than 2 years to get ready for your emergency fund. Because you need to get your emergency fund to be ready as soon as possible.
Take, for example, you give yourself 2 years to gather the RM12000.
Next, calculate how much you must put aside every month.
In your case, it will be RM12000/24 months. That will give you RM500 per month.
Comparing to a lump sum of RM12000, RM500 looks more reasonable and easier to achieve right?
Read more: The wise things I did with my bonus
In summary, it is possible for all of us to create and have an emergency fund.
All you need to do is to make sure you are persistent and follow the plan accordingly.
Hopefully, my sharing on how to create an emergency fund will be able to provide you with a starting point.
Read more: Should we spend less or earn more?
photo credit: ShebleyCL 20171004-IMG_3352.jpg via photopin (license)