How Long You Can Survive Financially?
It is a common personal finance question, but have lots of meaning behind it! “How long you can survive financially?” This question have fear about financial situation, worry about future uncertainties and a pointer to the required action to enjoy financial freedom.
How long can you survive financially?
A person can survive financially as long as he or she have enough fund or a well paying job or a business in hand that have money inflow as regular income. However, what happens if a job loss occur or the business is in trouble? Then the title question comes as valid, “How long can you survive financially?”. Here are few ideas to survive without a job or regular income.
Things to do to survive financially
From own experience, I have written an article earlier about how I survived critical financial trouble for two years. In my situation, my emergency fund helped me to meet all the financial requirements during the two yoears period I was unemployed and without any other income. Why I shared my own story? Yes, to provide motivation to people who are in the similar position or expecting such in future!
Of course, emergency fund is a great help and bless for working people. Creation of an emergency fund happening by saving my slowly but steadily. It would then park in a separate account and untouchable with a particular goal, protect self and family from financial crisis.
How do you know about how much you need to save?
This is yet another critical question when deciding to create an emergency fund. How much do you need to save for an emergency fund. A simple answer to this question is, an individual must find out his income and expenses. An amount equal to 6 months expenses is best to keep as an emergency fund, However, I strongly recommend people to have an emergency fund equal to 1 or 2 yeas monthly expenses!
Why would I suggest to keep 1 or 2 years expenses as an emergency fund?
From my own experience. I had faced the situation of unemployment and lived in the metro city of Bangalore for more than 2 years! During this critical situation, my emergency fund helped me to survive. However, I had a fund that time, was sufficient to meet only 14 months expenses. Rest 10 to 12 months? Yes, I had a plan in my hand to survive with the money and managed the same intelligently, as said in the article! It was a great experience in my life and a great lesson too!
Upon resigning from the job, I have got some amount that I have added to the emergency fund savings. It later helped me to survive 22 months. Rest, I have borrowed some money from my friends to survive!
How can you survive similar situation?
Emergency fund, no doubt, a must have friend in your life. You can plan how much you need to save and depends on your job, skills, current job market situation. possible job issues, number of family members etc. The amount saving as emergency fund can easily tells how long a person can survive financially by not depending anyone including family members.
Few planning along with the earning family members would give relaxation in the situation. However, I strongly suggest each earning members in the family should have their emergency fund separately.
How to create an emergency fund?
Creation of an emergency fund is not a simple task. It required discipline to save money little by little for longtime. I have already posted a beautiful article with complete steps that people can read and understand on how to create sufficient emergency fund.
Where should one park emergency fund?
It is better to have safe accounts to park emergency funds. Never invest emergency fund to stocks and shares or any other risky products. Safe haven for parking emergency fund is a separate bank savings account. If need a bit more interest, can select a best liquid mutual fund to park the money. I have taken the liquid fund route.
Summary
Individual can only decide how long they can survive financially. It all depends on their money management activities with focused goals to survive. There would not be any other easy methods to protect our self from financial troubles than preparing self to protect in advance.