What Is an Emergency Fund And Why Does My Family Need One? - Part -2

 Why Is It Important To Have An Emergency Fund?

One of the foundations of a strong financial blueprint is to carry little to no revolving balances such as credit card debt.  Without the safety net of an emergency fund, people with insufficient cash on hand are likely to charge a financial emergency, such as a furnace repair in the middle of winter, on a credit card.  This can create a cycle of debt that can be difficult to overcome.

Another principle for creating a sound financial future is to invest wisely.  If cash is not available when one of these emergencies arises, and I say when, not if, you may be forced to tap into a long-term investment to cover the expense.

Carrying credit card debt or having to sell investments prematurely can make it significantly more difficult to create wealth and become financially independent.

Why You Need an Emergency Fund

Think you can get by without an emergency fund? Check out these reasons for having one, and you won't want to.

An emergency fund allows you to:

·                        Take the pressure off of your monthly budget- with separate funds in place, your saving account no longer has to absorb all those extra bills that life throws at you

·                        Reduce financial stress- when you know you've done your best to prepare for the what-ifs, few things cause you worry

·                        Stay out of debt- if an unexpected expense pops up, you have the money to deal with it – no credit cards

·                        Protect your credit- a big expense won't send you on a downward spiral of late and missed payments

·                        Focus on the emergency at hand - not how you're going to pay for that emergency