What is the first thing you should do with your money ?

 What is the first thing you should do with your money ?

 

We are making money, may as Salary or commission or business income. But what is the first thing we should do with the money we receive? 

 

Creating an Emergency Fund is the first step in our Financial journey 

 

Income flow for any individual is important, but it can stop or any emergency can come in between, We have seen Covid situation. There are people lost job, there are families suffered due to health issues. All these situations, they were unable to work and expenses has increased. People had lead a life without income. This situation can come. Eliminating this risk is the first step in your financial journey. 

 

What is your Emergency Fund ? 

 

Figure out, how much is your monthly budget to maintain a desirable lifestyle including your EMIs, Insurance and other mandatory bills ? you have to have 6 months of this monthly budget as Emergency Fund. If you are sitting with zero emergency fund, it may be difficult to achieve 6 months budget at first. Then first, try to save for one month, then slowly increase to 6 months. 

 

How can you do it ? 

 

Keep a separate bank account or open a liquid mutual fund, then every month pay one portion of money automatically for this Emergency Fund. Continue pay each month, till you achieve 6 months expense. You can start small and be disciplined with this savings. 

 

Once you achieve it, you will gain the confidence lead a good financial life. Do not be over confident and start more spending from here onwards. Always keep a separate bank or mutual Fund debt schemes to store this fund.  Use only at real emergency such as job loss, hospital cases, do not touch for any shopping requirements. 

 

What are the alternatives you can look to fund Emergency Fund :

 

From your Savings : Over Draft or Credit Cards from your Fixed Deposits is a good option to create fund for emergencies, you can also look for loan against your equity or mutual funds or Gold is also a good option. 

 

Another options to look for Emergency fund if you are disciplined and no other options, you can fund emergency fund with your Credit card, free period. Please do not exceed due date when you use credit cards. You can check out personal loans as last option, if any emergency occur and you have exhausted available emergency fund. 

 

Before start investing, it is important is acquire a emergency fund for your personal finance. Emergency fund is a risk mechanism before insurance or any other issues which you wont get insurance. If you have emergency fund active, you can lead a tension free investment and money management. Emergency fund should be highly liquid, safe and earning return is secondary. Don’t consider, equity and Gold investment for emergency fund. Before finishing this article, just close your eyes and imagine, your six months emergency fund in your account and you are not worried about your next month salary and feel the confidence. This confidence should tell you the need to create an emergency fund for yourself.