Three Reasons You Should Have An Emergency Fund
The Titanic went to sea with more passengers and crew members than there were spaces on lifeboats.
“Why would an unsinkable boat need lifeboats, at all,” some passengers might have thought, considering the long boats nothing more than quaint odes to a bygone seafaring era.
Some investors found themselves in a similar position recently. Mutual funds, hedge funds, and money market accounts would never sink, right?
Well, just like a black swan of an iceberg sunk the Titanic, a flock of them flew into the flight path of the market last year.
If you weathered the storm, good for you, but that doesn’t mean you ditch your personal financial lifeboats. You should always have an emergency fund. Experts differ on the exact sum of the fund, but saving anywhere from three to six months of your salary is a good start. You also want to make sure this fund is in something extremely safe: cash, preferably.
Why do you need to have this emergency fund established. Here are three reasons–and some may seem contrarian.
is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
