Approximately, wise or not, if you have to borrow money for an emergency fund? Then is it wise if an emergency fund loan is used to meet needs?
Check out the review through the following Harry Potter articles and get a deeper understanding of the importance of emergency funds and how to collect them. Happy reading!
What is an Emergency Fund?
Hello friend Harry Potter! How are you? Hopefully in good condition!
Today we will discuss about “Borrowing money for emergency funds, wisely or not?”
Before entering into the subject of a deeper discussion, do you think you already know what an emergency fund is and the importance of an emergency fund that we have?
If not, then you must immediately understand it because the role of emergency funds is very important!
Actually, you can get an explanation of the complete emergency fund through one of the Harry Potter ebooks .
In it there are a number of discussions and several examples in easy-to-understand language, so you can immediately practice it.
In addition, you can get it for FREE without any fees. Fun is not it?
Therefore, let’s download the ebook immediately, and feel the benefits.
Eits, but it’s not right if we don’t discuss it through this article. Let’s go straight to the first discussion!
Get to know the Emergency Fund
As the name implies, an emergency fund is a fund or type of deposit that will only be used when an emergency or emergency occurs.
Approximately, what are the conditions called emergency and need for this savings fund?
One of them is when someone is suddenly “laid off” or terminated by his workplace for reasons of corporate downsizing.
If you experience layoffs, do you need daily financing for your personal needs?
Of course the kitchen in your house still needs to be smoky, especially for those who are married. Do children and wives not eat and need other daily needs?
Another example is if a family head suddenly experiences an accident that makes him unable to work again, aka permanent disability, especially if he dies. Of course this emergency fund is needed so that daily needs are still met.
Another example is if your vehicle is suddenly stolen by someone, it could be an event that requires an emergency fund. Especially if the vehicle is a means of transportation used to work and carry out activities that support our productivity.
Of course emergency funds to buy a motorbike, at least a down payment must be available right?
That was the understanding of emergency funds that we need to understand together including concrete examples that can be imagined, if we don’t have an emergency fund.
So, whether it’s an emergency fund or NOT IMPORTANT IMPORTANT? You can answer yourself!
The Importance of Knowing the Amount of Emergency Funds Prepared
So that our hearts remain calm when the critical problem arrives, let’s prepare an emergency fund from now on! We don’t know when will an emergency come?
Then, how to collect emergency funds and how much emergency funds should be collected?
Each individual has a different amount of emergency funds, usually depending on the amount of basic expenditure needs in a month.
For example, a student at a university in the city would certainly have an emergency fund different from a husband with one wife working in a small town.
The difference in marital status also underlies the difference in the amount of the amount of emergency funds, especially if the couple has been blessed with children. Of course emergency funds that must be prepared will be far greater than those who are still single.
So what is the amount of emergency funds that must be prepared?
The following is the ideal number of emergency funds needed in finance:
# 1 Single (no dependents)
If you are single and have no dependents, the ideal emergency fund is 6 times the amount of monthly expenses.
# 2 Marry (no children)
If you are married but do not have children, the ideal amount of emergency funds is 9 times the amount of monthly expenditure.
# 3 Marry (have children)
If you are married and have children, the ideal amount of emergency funds is 12 times the amount of monthly expenditure.
You can use the Application Harry Potter know to calculate the amount of your emergency fund. The method is also very easy!
- Make sure you have downloaded the application through the Google Play Store or registered via PC.
- After that, open the application and select the “Financial Plan” menu.
- Click the “+” symbol in the lower right to add the Financial Plan and select the “Emergency Fund” option.
- Enter the required amount of data, namely:
- Monthly expenses, for example IDR3,500,000.
- Marriage status, for example: Single
- After that click “Calculate”, then the conclusion in the form of the necessary emergency funds will appear. This amount is a matter of calculation of the data that has been entered.
In this way, you can manage your finances more clearly so it is not impossible to prepare an emergency fund while achieving other financial goals.
Benefits of Emergency Funds
Have you collected emergency funds?
Of course you don’t want to have financial difficulties because of an accident or a precarious situation that suddenly comes over?
Did you know, there are at least 2 benefits from the availability of emergency funds that we collect before the disaster or the precarious condition that destroys our financial situation.
# 1 Controlled Stress Level
In addition to giving us time to breathe a sigh of relief when a precarious situation strikes and eases the burden, this emergency fund is useful for reducing stress levels.
Imagine if our minds accumulate problems, plus if there is no available funds. Of course we will be more stressed and even fall ill. Didn’t it even add to the burden?
# 2 Avoid Debt
The option of borrowing money to meet emergency funds can indeed be an option, especially if there is no other way that can be taken. But, it would be better if we did not borrow money right?
Once there was someone who confided when he would collect debts from his friend. The recipient of the debt is even more fierce than the lender. You can see how sensitive money is in a relationship.
Even in relationships with the closest people, the problem of money can be a fire that destroys a relationship.
Therefore, it is highly recommended to be able to prepare an emergency fund, without having to borrow money from other people to be free of debt.
Borrow an Emergency Fund
Given the importance of having an emergency fund for critical situations that we cannot predict beforehand, we now arrive at the question, “Is it wise to borrow an emergency fund?”
This question arises when we are experiencing one of the precarious conditions above but do not have an emergency fund or the funds we have are not enough.
A 2018 Federal Reserve survey of economic welfare shows that in 2017, 4 out of 10 adults still said they could not bear emergency funds of US $ 400 or more and they were forced to borrow money or sell something to pay bills caused by emergency state.
For those who have no umbrella when the rain arrives, it will certainly be difficult.
If there are still assets that can be sold, of course it will be very helpful, but still we will lose that asset , right?
For example, when things happen precariously, you still have deposits in the form of deposits, gold, and also land that can be sold. Deposits and gold can indeed be quickly disbursed relatively quickly.
But if it is in the form of property goods such as land or home ownership, it certainly takes a long time to disburse it. Since this is an emergency, aren’t you in need of money in a fast time?
Back to the original question, is it wise to borrow money to meet or finance an emergency fund?
If indeed there is no other way, borrowing an emergency fund can indeed be an option.
But of course not just borrowing from people or an organization borrowing money that actually adds to the debt to be piled up, especially if borrowing from moneylenders.
Not to alleviate the problem, but instead make the problem even bigger.
Borrowing to relatives or relatives is strongly recommended. In addition to those who are still in family relationships, usually family members or close relatives will not ask for more money or self-help in exchange for remuneration.
How to Collect Emergency Funds
Use this method to collect and make your emergency from now on.
# 1 Set Monthly Targets
Create your own monthly target that can be saved from your monthly income.
Get used to saving it in a separate account from the account that you normally use for your daily needs.
If you want to be simpler, you can use the auto-debit facility to transfer your money to an emergency fund savings account.
# 2 Don’t Underestimate Receipts
Of course you get a dime in the form of metal or paper that you take for granted. Not infrequently we give to small children or to park, or even left lying on the table or if wasted, will not be ignored.
Eits , don’t underestimate the change. A proverb says, “Little by little, it gradually becomes a hill.”
This proverb can be very implemented in saving life. Collect your dime and don’t take it lightly. One million without one hundred rupiahs, won’t be one million, right?
Once your change has accumulated so much, you can save it to the bank and put it in an emergency fund savings account.
# 3 Monthly Money Check Every Month
How you manage your monthly money will determine how much emergency funds you can collect.
Not infrequently those who can resist the urge to use the remaining money or more money in the account at the end of the month.
Thank you … if there are still leftovers. But, still resisting the urge to buy desires is a difficult thing to do.
Where there is intention, there is a way. If there is residual money in the account at the end of the month, you can enter it into the emergency fund account.
# 4 Cut unnecessary expenses
You will find out for yourself, where expenditures must be spent based on needs and which can be reduced or cut, even eliminated because it is not in the category of needs.
If you can find every opportunity, you can collect more of your emergency funds.
One More About Emergency Funds
Given the importance of emergency funds at critical times, you are strongly advised to save emergency funds in a safe and easy to disburse storage area.
For example in a bank account that has low cost deductions or no deductions at all, saving in the form of deposits or gold.
In addition there are also those who suggest saving it in the form of money market mutual funds.
Immediately collect emergency funds from now on, don’t let you get confused when an emergency happens to you.
Have you collected your emergency fund? How much emergency fund do you collect? Do you think emergency funds can be used for investments like stocks?