At 2.00 a.m., I was still planning to build up emergency fund for this year. I afraid that I’m too late to build it up. My fear rose when something bad has happened to my friend and he didn’t has any reserve money for that. His car broke down, he has to pay over RM 1000 to auto mechanic because the radiator needed to be replace. Now, he has no other choice but to utilize credit card.
Therefore, I plan for my emergency fund to prevent any uncertainties come around in future.
Short Term Goal
For this year, I need to set aside at least RM 1000 for emergency fund. To achieve the short term goal, it require RM 90 a month to contribute. That about 4 %-5 % of my monthly salary. (RM3/day)
Mid Term Goal.
After total up my daily expenses, car loan payment, housing loan payment, and other things like credit card debt, student loan, and bills for six months, I need have reserve money at least RM 9000. So I have to save about RM 187.50 per month to complete my goal in four years. (RM6/ day)
I need to achieve my short term goal first and then continue saving for mid term goal.
Long Term Goal
After I complete my mid term goal, I will go on with this huge mission – to save RM 60 000. That figure equals to a year salary of my wife and I. This goal is hard to stay on the track because of the big amount plus the cost of living will escalate over the years. My wife and I will do our best to achieve this goal. This goal requires me to drop RM 300 a month in 12 years (If 8% interest compounded). (RM10/day)
I’m thinking several reasons why I need seriously to build up emergency fund plan in my life:
- Unexpected event happens and it will cost me a lot of money. What if lighting strikes my house and damages all home applications in my house? I will have a financial distortion that month.
- Act as a burden relief. I already have many debts surround me – 2 car loans, a housing loan, credit card, and student loan. I don’t want to add up any figures if something big happens.
- Can be a cushion to my budget. If my refrigerator happens to be damaged and needed to repair. I don’t have to add up to my monthly budget.
- If I get fired or lost my job. I do really need the financial backup if I lost my job and waiting for new job to land. That’s why I need backup money equivalent to 6 months of expenses.
Remember, emergency fund is only to use when only it is emergency. Do not use it as a car down payment or resource for shopping spree. Only use when emergency happens!!