Business Description
Best Emergency Mutual Fund | InnvestAs the name implies, an emergency mutual fund is a buffer set up to deal with unexpected emergencies that may arise and put a strain on your monthly cash flow. In the absence of this corpus, you may be forced to rely on credit cards (annual interest rates as high as 40% – 47%), personal loans (interest rates as high as 15% per annum plus processing fee), or other costly borrowing options that will burn a bigger hole in your pocket. You do not need to create a new emergency fund if you already have a large portion of your savings parked in a savings bank account or fixed deposit. You can simply divide the corpus into suggestions.
How Much Emergency Mutual Funds Do You Require?
Every person has unique financial requirements. Each person has a unique set of circumstances, including a lifestyle, dependents, income, and unavoidable expenses.
As a result, each person's figure will be unique. Before calculating the size of your emergency fund, determine the bare minimum you require to cover your unavoidable monthly expenses.
This should include things like house rent, loan payments, utility bills, and so on. Make certain that you do not include avoidable expenses such as movies, travel, and so on in this amount.
Once you've determined your monthly expenses, try to save enough money to last three to six months without receiving any income.
It is always a good idea to keep some money in emergency mutual funds set aside for difficult times. However, it is a double-edged sword because the more liquid your money is, the less interest it earns.
Most importantly, if you do not save money for an emergency mutual fund, you will lose out on significant earnings. So, what are you going to do?
Regardless of proper planning, the following events can occur at any time and necessitate significant liquid assets (emergency fund) to meet financial needs:
Global/national disaster: The unanticipated spread of the COVID-19 virus is a classic example of how an emergency can knock on your door when you least expect it, how it can affect your business or professional life, and how it can put financial strains on you.
Unexpected Job extinction: Even if you have a secure private-sector job, you cannot rule out the possibility of a sudden job loss. In such a case, managing the payment of EMIs, Insurance Premiums, and so on while maintaining your regular lifestyle etiquette will be a major challenge.
Medical emergency: Even if you have health insurance, there may be diseases that are not covered by your policy. Also, your insurance plan may not be completely cashless (you may have to bear 10% -20% of the expenses) or you may have to pay for reimbursement rather than cashless.
Planning a Sabbatical: You may want to take a break from your regular job to focus on finishing a short course, working on something you truly want to, spending time with your family, or taking a long vacation. Taking a sabbatical is unpaid leave, and the lack of an emergency fund may force you to dip into your long-term investments.
KEY TAKEAWAYS:
An emergency fund should strike a balance between earning interest and making money available quickly.
Stocks can be volatile, and selling them in a time of crisis can result in a loss.
Three to six months' worth of expenses should be kept in a checking or money market account with check-writing privileges.
Summing up:
While this requires careful planning and strategic investing, it all starts with establishing an emergency fund to cover any unexpected expenses in the near future.
While this may appear extravagant in normal circumstances, it can be extremely beneficial in emergency situations such as the current lockdown. If you haven't already started, make 2020 the year you begin the process of accumulating an emergency mutual fund.
Contact us to invest in the best Emergency Mutual Funds advisors.
