Are you taking a sigh of relief after tackling your debt consolidation successfully? This must give you a great sense of financial freedom accompanying streamlined payments. But before you wear yourself out with all the celebrations, you must also consider building a proper emergency fund.
I have seen many people prioritise debt payment over saving, which seems sensible to most extent. However, this does not mean you should focus all your resources on debt repayment without having a financial safety net.
This is where an emergency fund comes into the picture to save you from unexpected expenses that might put you in debt again. In this article, I will give you a better insight into building an emergency fund after debt consolidation. So, let’s dive in!
Why is an emergency fund important after debt consolidation?
Using the best debt consolidation loan as an emergency fund after consolidation is your best shot to avoid unexpected financial vulnerabilities. Naturally, many factors make these funds important, and some of these factors include the following:
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[1] Peace of Mind: The first and most apparent of these factors is that an emergency fund gives you the ultimate peace of mind. I believe even knowing that you have a financial safety net will allow you to better focus on your long-term financial goals.
[2] Unpredictable Expenses: Life is unpredictable for everyone, whether you or me. Things like sudden car repairs or medical expenses can derail your budget entirely. This is where an emergency fund will rescue you and save you the trouble of resorting to credits with higher interest rates.
[3] Sudden Job Loss: Sudden layoffs are common in the post-COVID world. I recommend you prepare for the worst and set aside an emergency fund for these tough days.
How can you build an emergency fund like a pro?
Building an emergency fund is not as challenging as many make it sound. Instead, just following a couple of simple steps is enough. So here are some of the steps that I find helpful for building an emergency fund:
Step [1]: Set a Goal
You must start things right with a clear goal or intent behind building an emergency fund. This will keep you motivated and track your progress as you go. This way, you can determine how long it will take to realise your goal.
Step [2]: Keep your contributions consistent
It becomes very important to ensure that you keep some funds aside regularly. This might be setting aside a part of your salary or cash daily. I recommend you keep your approach flexible and pick a saving routine that best caters to your needs.
Step [3]: Monitor your progress
This is another important thing to remember when you regularly monitor your savings progress. You can maintain a notebook depicting all your contributions or save transaction details online. This will encourage you to save more as your emergency fund grows.
Step [4]: Replenish the account after withdrawing funds
The primary intent behind having an emergency fund is to use it in emergencies. However, the important thing here is you must make the right efforts to replenish the account right after you get the funds again. This is important for keeping your progress consistent and ensuring you get the best out of your emergency fund.
Final Thoughts
Most people will agree that building an emergency fund after debt consolidation is a great financial move. This gives you the proper financial security to protect yourself from any adversities in the future.
I would like to clarify that financial freedom is not something you achieve in a day. Instead, this is an ongoing journey that requires your consistent efforts and commitment. I would recommend you start small, take one step at a time and tread closer to a life with financial freedom.
