Let's get right to the point. Before we start I would like to say this is not financial advice. Alright, how to set up an emergency fund?
First, what is an emergency fund and why do you need it? An emergency fund is a fund that you allocate a part of your salary to. You do this to prepare for unexpected expenses. That could put you 1000s of droller in debt. Alright, let's get to business.
The best way to set up an emergency fund is to. Set aside some monthly income for an emergency fund. I would recommend setting aside at least 1% of your monthly income for this. Let me tell you why. According to CNBC, 38% of Americans can't afford an unexpected expense. Isn't that terrifying? This is caused by not saving or investing enough money to cover any unexpected expenses. There are lots of types of unexpected expenses. The most common being a car or medical bill. If you live in the US you know how expensive these bills can get. So to prevent this were going to set up an emergency fund. Step 1 set aside a small part of your monthly salary 1% of your salary is perfect. Step 2 now once you've done this. You have to hold it in a separate bank account or in any place that is hard to access but not impossible. This is to stop you from using this money to buy any other things. Once you've done that deposit some part of your salary. Into this account monthly. Step 3 now you've got money in the account. The last thing you want to do with this money is to invest it. Let me tell you why. Investments can be very volatile and usually will lose you money in the short term. That's why you should hold this money in the currency or coin that is paired with the US dollar. Unexpected expenses are unexpected so don't invest in even the S&P 500 because you don't want to be withdrawing money from the S&P 500 when you're down 10%. That's why keep your money in dollars that are not invested. That's it that's how to set up an emergency fund. Be willing to do this for years on end while committing a small part of your monthly salary like I said 1% of your monthly salary will go a long way.
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