Do I Really Need an Emergency Fund or Pay Off Debt?

A reader of Total Investment, ask this question; “do I really need an emergency fund, why should I build an emergency fund, please clarify, I am new to personal finance” We are in uncertain world, we don’t know what will happen tomorrow or after you have read this post.

The basic in personal finance is to have emergency funds, insurance including health and life insurance, paying all your debts and start investing.

If you are following this blog, investment for beginners, you will noticed that we really recommend emergency funds before investing your money.

Do I Really Need an Emergency Fund or Pay Off Debt?

An emergency fund has a great role in our day to day living especially when unexpected event occur.

Many financial planner advised you to build an emergency funds, an emergency funds should be easy to access (might be in your separate bank account). This fund is exclusively used only for serious emergency cases like loss of job, illness or accidents.

How Much Should be in an Emergency Fund?

The emergency funds amount to build should be equivalent to at least three to six months of your income. Example, if your monthly income is $5,000, you must have an emergency funds amounting to $30,000. When you have an emergency fund, you have a peace of mind. Emergency funds can help you from financial stress during emergency. You don’t need to lend money to cover the expenses when emergency occurs.

Therefore, before investing your hard earned money, it is really advisable to build your emergency funds. So that, when emergency comes, you don’t need to pull out all your investment funds.

The answer to the reader’s question Do I Really Need an Emergency Fund is, absolutely YES! If you liked this post, share it to your friends and fellow new investors.