Life's Unexpected Twists: Are You Ready?

 

Remember watching Bigg Boss and hearing "Expect the unexpected"? It makes the show exciting, right? You never know what's coming next. But think about this: while we enjoy the surprises on TV, we often don't prepare for the unexpected things that happen in our own lives, especially when it comes to money.

On Bigg Boss, the contestants plan for surprises. They know something unexpected will happen. But in real life, a sudden job loss, a health problem, or a big event like the COVID-19 pandemic can hit us hard financially. The stakes are much higher, and the results can be serious.

So, are we as ready for life's surprises as those Bigg Boss contestants? If not, maybe it's time to take that "expect the unexpected" idea and make it our own financial rule.

Think about it: almost every unexpected problem in life comes down to money.

• Need to go to the hospital? That costs money.

• Lose your job suddenly? You need money to get by.

• Your house needs a major repair? Again, it's about money.

The COVID-19 pandemic showed us that many people weren't ready for big surprises. Families with some savings were able to manage. But those without savings had to do tough things like:

1. Borrow Money: Taking out loans with high interest or asking friends and family for money. This can cause money problems later or hurt relationships.

2. Sell Things: Selling valuable items like jewelry, property, or cars quickly, often for less money than they're worth.

3. Take Money Out of Investments Early: Taking money out of long-term savings like fixed deposits or mutual funds before you should. This means you lose out on potential growth and mess up your future money plans.

Having an emergency fund is like building a strong base for your money. It means you don't have to panic or make these tough choices when life throws you a curveball. Instead, it gives you a financial cushion so you can handle problems calmly, stay stable, and keep working towards your long-term money goals.

What Should Your Emergency Fund Cover?

The amount in your emergency fund should depend on your own income and how much you spend each month. Think about the important things you need to cover:

1. Basic Living Costs: Rent, food, electricity, and other things you need every day.

2. Insurance Payments: Health and life insurance so you don't lose coverage if you have money troubles.

3. Loan Payments: To avoid hurting your credit score or having legal problems.

4. Kids' School Fees: So your children's education isn't interrupted.

5. Money for Dependents: If you support others, like elderly parents, make sure their needs are covered.

6. Unexpected Repairs or Medical Bills: Things like car repairs or sudden health issues.

By knowing how much you spend each month, you can figure out how much money you need in your emergency fund to cover these important things during a crisis. Including money for education and dependents makes sure your family is taken care of even when times are tough.

How Much Should You Save?

Building an emergency fund takes time. Here's a simple plan:

1. Start with 3 Months of Expenses: This is your first safety net.

2. Aim for 6 Months: Slowly save enough to cover half a year's worth of expenses.

3. The Ideal: 12 Months: The best goal is to have enough saved to cover a full year of expenses for peace of mind.

Where Should You Keep Your Emergency Fund?

Your emergency fund should be easy to get to when you need it. Here are some good places:

1. Savings Account: Keep some money here for quick access. The interest might not be high, but you can get to it easily.

2. Liquid Mutual Funds: Put the rest in liquid funds. They can give you slightly better returns than a savings account, and you can usually get your money within 24 hours. This makes them a good backup.

Don't lock your emergency money in fixed deposits or risky investments. Remember, being able to get to the money quickly is more important than earning a lot of interest.

Money Gives You Strength in Tough Times

Having money saved for emergencies gives you the power to deal with problems without panicking. It's not just about the money itself; it also helps you feel more confident and make clearer decisions. Whether it's a medical emergency or a job loss, an emergency fund protects you from stress and worry.

Your Protection Against Life's Surprises

An emergency fund is more than just another part of your financial plan. It's the base of a secure and strong financial life. It gives you the strength to handle unexpected events.

So, the next time you hear "Expect the unexpected," let it remind you to get ready for life's uncertainties. With a good emergency fund, you'll have the peace of mind and financial strength to face whatever comes your way. You'll be able to handle the unexpected with confidence.

Like the saying goes:

"In moments of crisis, money isn’t just a resource—it’s your superpower." – Srinivasan Subramanian