7 Personal Financial Crises and Emergency Fund

Life is unpredictable and uncertain.  Whatever you do there is always a risk element. Even if you don’t do anything you may be afflicted with one of the critical illnesses. I think these are the 7 crises that will impact your financial well-being seriously:

1.   Critical illnesses: The cost of hospitalization and treatment plus the cost to recuperate will cost you a bomb. That is why you need to look after your health by following a healthy lifestyle like exercising and  sticking to a balanced diet 

2.   Getting retrenched or out of work: Being out of work is not only hurting you financially but your health and your self-image are also dealt with a heavy blow. 

3.   Failed business venture: Nobody can guarantee that every time you go into business you will be successful. When it is not doing as expected your initial capital will also vanish in thin air.

4.   Failed investment: Do not be gullible and listen to get rich quick schemes. In most cases, they are too good to be true. It is also possible that you have chosen the right investment but you have gone in at the wrong time. The worst thing that can happen to you is during a worldwide financial meltdown your investment is worth very little or no value at all.

5.   Without a financial plan: When you don’t have a budget it is very likely you will overspend. It means you will get into debt and it may lead to bankruptcy. Budget and live within your income is the only way to avoid a money crisis.

6.   Impulsive credit purchases: It is a sure way to get into a quick financial crisis by charging your credit cards to buy what you want to enjoy instead of essential items only.

7.   Gambling: It is a bad habit doomed to cost you a lot of money or all of your wealth and in the worst scenario, your life as well.

Emergency fund

According to experts, you should be keeping about three to six months living expenses as an emergency fund. In the event that one of the above crises strikes and you are unable to be productive, the emergency fund will be mobilized to take care partially if not all of your expenses during the devastating period. Those without financial planning and using credit cards freely are unlikely to have an emergency fund. An emergency fund will not help habitual gamblers. If they don’t kick the habit no amount of emergency fund can help them.