It is a separate amount of money, withdrawn from your finances, destined for any unforeseen event that may happen. Used on the last possible occasion. Emergency reserves are funds you save for unforeseen financial situations. Of course, nobody wants to worry about emergencies, but as long as there is a special fund, it will ease your mind.
It is very important for anyone to keep this in mind and put it into practice, but many people do not even know what an “emergency reserve” or “emergency fund” is.
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How to start building emergency reserves
You may wonder, “So what should I do? Do I save a portion of my money every month?”. not yet.
The first step is to organize your finances and understand how much your cost of living is, that is, the cost of living, that is, how much money you spend each month, whether you are an individual or a family.
To do this X-ray of your financial life, you need to write down your entire financial situation on paper and understand how your budget works: how much do you spend on food? Is there transport? Will these trips to the movies and bars affect your salary? At first glance, this may seem like a challenge, but we are here to help you with this task!
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How much can the emergency reserve fund save
Generally speaking, financial experts recommend that people save 6-12 months in living expenses every month based on job stability.
When looking at your financial spreadsheet, you need to add up all of your monthly expenses to calculate your monthly cost of living. For example, if this amount is 2,000 reais, your emergency reserve must be between 12,000 reais and 24,000 reais.
Yes, we know that’s a lot of money, but don’t worry, because emergency reserves aren’t built overnight. With financial control and trying to save a little money every month, your reserves will accumulate and you can relax more in case of unforeseen events.
The self-employed or entrepreneurs need to work harder to have more reserves, because the difference in monthly income is greater.
When to use the emergency reserve?
- in health cases
- extreme need
- job loss
These are some of the possibilities you can use your emergency reserve. It will always be last chance.
