Fearing Job Loss? Here’s How To Build An Emergency Fund For Crisis
An emergency fund could be your lifeline in case of unexpected events like a job loss. It helps you stay afloat during a crisis.
Anxiety about job security is a huge cause for stress, especially when sudden changes like layoffs take place. Having a financial buffer in place can help to cushion the blow. An emergency fund acts as a buffer, providing peace of mind and financial security.
Recent layoffs across sectors, especially in the IT industry, could be alarming for many private sector employees. If you are looking at ways to safeguard your finances, here’s how you can start building an emergency fund.
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Know How Much You Need
The first step is deciding how much to save. A general guideline is to save enough to cover three to six months’ cost of living. This should include rent or EMI, groceries, utility bills, premiums for insurance and any other fixed charges. If you are the only earning member of your family, consider building a larger fund of around nine to 12 months of expenses.
Start Small, But Start Now
Do not get disheartened if you cannot save much all at once. Start with a small fixed amount each month; even saving Rs 1,000 a month could lead to a sizeable fund over the years. Automate payments to an independent savings account so that you are consistently stashing away money without feeling the urge to spend.
Cut Non-Essential Spending
If job loss is a real worry, it’s time to tighten the purse strings. Cancel unused OTT subscriptions, reduce dining out and delay big-ticket purchases. Every rupee saved can go toward building your fund faster.
Choose The Right Place To Save
Your emergency fund must be accessible, but not so accessible that you keep withdrawing from it for non-emergency expenses. Think about investing the money in a liquid mutual fund or a high-interest savings account. Do not lock it in instruments such as fixed deposits with long tenures or the stock market, as these may prevent access or put the invested capital at risk.
Keep Reviewing
If your monthly expenditures increase, adjust your target suitably. In case you do end up using a part of the fund, prioritise restoring it as quickly as possible.
Overall, though losing a job is a difficult option to consider, having a savings cushion means you are future-proofing yourself and your family. Through disciplined savings, you can sail through choppy financial weather without falling into a debt trap.
