Financial experts usually recommend that you should have the equivalent of three to six months’ worth of wages stashed away in case of an emergency. While that is a simple-to-calculate method, it does not take into consideration other things that affect how much cash you will need. Such things include the type of job you have, the industry you work in, what other financial resources you have access to, and your expenses. Your ultimate emergency fund will take your overall expenses and income into consideration in order to give you the greatest opportunity of maintaining an emergency fund.
One issue with conventional emergency fund size advice is that it focuses on income instead of expenses. If you’re fired from your job or unable to work, it’s important to have an emergency fund that can cover your expenses.
With lower tax brackets, your expenditures and wages are likely to be closer together, as more wages are spent on everyday living needs. With higher tax brackets, a larger portion of your wages goes into savings vehicles; for instance, retirement plans, college savings, or saving for a trip. The goal of an emergency fund is to keep food on the table and a roof over your head should the unexpected ever happen.
When putting your emergency fund together, calculate all of your living expenses for one month. Include the bare minimums, such as your rent or mortgage payments, utilities, food, and other necessities and bills. Ideally, an emergency fund should be able to cover these monthly expenses for at least a few months.
If you’re thinking that you could always turn to credit cards for an emergency fund, think again. Credit cards are not suitable for emergency funds because of the amount of credit you’re offered, or lack thereof. Additionally, adding extra bills on top of your other monthly expenses can be a recipe for disaster when you’re already struggling to pay for everything else.
If you are the recipient of an annuity payment stream, Peachtree Financial Solutions can provide you the money you need to start your emergency fund by purchasing your future structured settlement payments. In return, we will provide you with a large lump of annuity cash now, which will be equal to the entire value of your annuity payment stream. Alternatively, you can sell just a portion of your future payments and receive a smaller amount of annuity cash up front. Contact Peachtree Financial Solutions today to learn more and to receive your free quote!
Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.