Description

You need to have a plan in case of an emergency and typically you need some money to go with that plan: your Emergency Funds. 

First, let’s define Emergency: something which happens unexpectedly, which you could not easily predict would occur at this moment. Examples include losing a job, having a severe accident or having to take care of a loved one. As you can tell, these mostly include losing or temporarily leaving your job, which means no income for some period of time.

Emergencies are not the fridge breaking down, car maintenance or a new roof. All of those you can easily predict will happen in the future and you need to plan and budget for those separately. 

So, what to think about in terms of this emergency fund?

• Typically it should be 3-6 months of required expenses, in case you lose a job.
• You can increase or decrease that depending on job stability, income stability and your employability.
• This fund should be mostly in cash. Cash is King.
• If your brokerage portfolio is large enough, you can have this money invested as part of your overall portfolio.

Mostly you need a plan for when the sh*t hits the fan. Make sure you are prepared.