Got Any Spare Change?

When I first started out as a freelance writer, I was certain that it will take off immediately and I wouldn’t have to worry about money. It’ll start rolling in, right?

Unfortunately, no – money didn’t start rolling in. I had small-time jobs that paid miserably and my savings were dipping faster than you can say do the limbo rock. I should have saved more before I quit, I told myself... a little too late for that. Or maybe I shouldn’t have quit just yet looking at my measly savings account.

Before you know it, I was down to my last RM500. Where would I find the money to pay for my car, house, insurance or even to eat next month? Can you imagine the stress I was going through?

Luckily, I secured a contract job that paid extremely well to lift me out of my debt. But some people may not have been as lucky as I was. They may not see money coming in for a long time. And that’s when the real problem begins when they can’t make the payment for their fixed expenses like car, insurance, rent, mortgage, food and more.

No one wants to think of the worst but that’s the thing with life – emergencies can happen when you least expect it. Or in my case, when you fail to plan properly, you suffer the consequences.

Consider this: You have a certain set of fixed expenses each month, right? Your car, life insurance, rental or mortgage, food, transportation... If you’ve been living from pay cheque to pay cheque with very little savings in your bank account, what are you going to do if you find yourself unemployed with no money to pay for all that one day?

Enter an emergency fund. It’s self-explanatory: Money from the emergency fund is used for emergencies. But what constitutes an emergency? Needing that dress for a friend’s wedding isn’t exactly an emergency. Not having a job and therefore no money is an emergency you need to fix right away. Or maybe you had an accident and need to fix your car as well as pay for medical bills... but you have zero in your savings. Now that’s a real emergency.

The problem with people in general is that we are often too comfortable in our current position, so sure that nothing will change. Or we fail to think ahead, not taking into consideration that things may not go as planned – like not having enough clients to make a decent amount of money each month as a freelance writer.

This is where the emergency fund can save you from a lot of headaches. It covers you in the event of an unexpected financial blow and helps prevent you from going totally broke or on the negative. An emergency fund also provides a sense of relief in case you’re fired, decide to leave a job before seeking a replacement, or come into a situation where you’ll need to spend a lot of money in a short amount of time. Essentially, it is money that can help cover the things you don’t budget for like car repairs, medical costs, home repairs.

How much should you have in your emergency fund? Financial experts recommend saving at least six months worth of your salary to tie you over in case of emergencies. A tip to get to this six months’ worth of savings is to cut out the unnecessary in your life – less eating out, fewer cups of coffee or boba, staying at home more to read than going out to spend money – things that you can do without for the time being.

Then when you’ve reached the six-month mark, you can give yourself a treat – but don’t take it out from your emergency fund, which you should only use in case of emergencies or it defeats the purpose!

Photo by Michael Longmire on Unsplash