Why you should create a reserve fund and replenish it regularly

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Take care of it now and then thank yourself more than once.

What is a reserve fund

The reserve fund is one of the main ways to ensure your financial stability. You save up a certain amount of money and do not waste it on trifles, but save it for unforeseen expenses, thereby forming a financial safety cushion.

When the reserve fund comes in handy

Not everyone sees the point in the formation of an airbag, because they are vaguely aware of the threats that may arise. Someone, for the same reasons, cannot provide immunity to savings: "All is well, what can happen?" But anything can happen. Here are a few situations where a contingency fund will save you.

1. Dismissal

Finding a job can take a long time. During this period, you need to eat something, live somewhere, somehow go to interviews, pay for housing and communal services. If you are not the only earner in the family or you have additional sources of income, a sudden layoff will not hurt you so hard. However, one way or another, the loss of regular earnings will affect your financial stability. The reserve fund will help you survive the job search period with little or no lifestyle change.

2. The emergence of a dream job

It happens like this: you work in a well-paid but unloved job and suddenly you see a dream job. The salary is lower, but the prospects are brilliant. If you have an airbag, you can live on it until the salary grows. The reserve fund will provide support for the transition period and help fulfill wishes.

3. Decrease in earnings

If you receive a salary in an envelope, then at any time you can reduce it unilaterally. In this case, it is up to you to leave or stay. But the financial imbalance will somehow have to be corrected. And here the reserve fund comes to the rescue.

4. Disagreements at work

If a person does not have a financial cushion and other sources of income, he is often ready to endure the rudeness of his superiors, unpaid overtime work, a change of duties and many other unpleasant things. When you have a reserve fund, you can not feel like a hostage to the situation, leave at any time and calmly look for a new place.

5. Going to freelance or starting your own business

At the beginning of the journey, income will be irregular, so it is important to have an airbag.

6. Illness

If you are officially employed, receive a white salary and have more than eight years of experience, then on sick leave you will receive 100% of the average daily earnings for the last two years of work. If your seniority is less or your salary last year was minimal, this will affect the amount of payments. Those who received money for work in an envelope or worked on a piecework basis will cheer at their own expense.

But that's not all. In case of illness, expensive medications, tests, and surgeries may be needed. Much of this is available under the compulsory health insurance policy. But this is according to the law. In practice, it’s better to be willing to pay.

7. Pregnancy and childbirth

With the arrival of a child, family income decreases and expenses increase. Ideally, of course, it is worth adapting to new conditions and not spending money from the reserve fund. But having a financial cushion will significantly reduce your stress levels.

8. Moving

Even moving to another apartment can hit your budget hard. In Russia, the legal framework for the rental housing market is poorly developed, so you may be asked to move out almost at any time. In such a case, you should have in store for an amount of three rent: for the first month, for the last and for the services of a realtor. You can get by with less losses, for example, looking for housing without an intermediary. But it's better to have money for everything.

Moving to another city will be even more costly. Add money for travel, transportation of things, and so on to your rental expenses. Of course, in most cases, such transfers are planned in advance, but anything can happen. For example, you may receive a lucrative job offer that requires immediate relocation.

9. Loss of a tool for earning

Let's say you're a copywriter and you drop your laptop in a bathtub of water. Or you are a taxi driver and you crashed your car. Without your tool, you will not be able to earn money, so you urgently need to fix it or buy a new one, depending on the degree of damage. You can take out a loan, but it is better to use money from the airbag.

10. The need for the services of a lawyer

You flooded your neighbors, and they demand compensation of such a size that you can repair the entire staircase. Or you walked past a rally and woke up in a paddy wagon. Or you protected a passer-by from beating, and now the attackers present you as the aggressor. In these cases, the services of a lawyer will not be superfluous, and they need money.

11. Family discord or violence

A financial airbag (but this time a personal one, not a family one) will help you to evacuate on time.

12. Death of a loved one

A funeral is a costly event in itself. And if the misfortune happened in another city, then the costs will only increase.

How much to put aside in the reserve fund

To determine the amount you need, you need to know how much you spend per month. The minimum amount of an airbag is enough for three months of a quiet life. But it is better to have a stock for at least six months.

How to store your reserve fund money

It's good when these tools are always at hand. But this does not mean that they should be put in a box and watched as they depreciate due to inflation. A card with an interest on the balance or a savings account will also work. It is important that you can withdraw money at any time without losing interest.

A deposit for storage will not work, because such a deposit has a specific term. The same goes for investing in stocks or bonds. Leave these methods for other savings.

What to remember

1. Everyone needs a reserve fund. He will protect you in difficult situations and give you the chance to seize opportunities.
2. Better to have an airbag for six months of life.
3. Back-up money should be readily available.