Let’s be real frank right here – Money makes the world go round, you couldn’t agree more with this, isn’t it? Being ranked as the top cities to live in, Singapore is unfortunately the highest cost of living city in the world. In fact, just when you thought the cost of living couldn’t get any higher, you are so wrong. Everything is increasing, like the healthcare, housing, petrol, food, basic necessity but the only one that stays stagnate would be our salary. Most Singaporeans couldn’t agree more with this and it is extremely difficult to save up on monthly basis due to the monthly bills and commitments as well.
According to Singapore Business Review article, almost half of the Singapore population have little or even no savings at all. This is a saddening polling results. Fortunately, this is not the end and there is still possibility to turn your financial situation 180 degree around. It is time for you to take a leap of faith, you need to start building up an emergency fund and the future you will be thankful.
Why is emergency fund necessary?
We all know that accident happens, anything can happen anytime and at any point of time. Unless you are equip with special superpower to predict the future, if not, there is absolutely no way you can know when will an emergency arise. All it takes, is just one major event to drain you out and leave you in debts. Times like this, what are you supposed to do? Approach your friends and families for help? How much help can you get? What if you don’t?
There are always options and one of the alternative could be getting a instant personal loan or urgent payday loan from licensed money lenders in Singapore. Even though it may not be the best option, but let’s admit, it will solve your current problem much faster than other options such as banks.
This acts as a financial buffer for you as it protects your savings from unforeseen circumstances such as:
1. Medical Bills: In Singapore, most of us are protected by MediShield and able to use Medisave, but you still need to take out a sum of cash to pay off your expensive bills. It all depends on the conditions, the length of your stay and the class of your ward. All these can easily drain off your savings.
2. Home Appliances or Auto repairs: Having to repair your car and aircon can be quite be quite draining as the cost can go up to 3 digits or even 4 digits, depending on the conditions.
3. Loss of jobs: As Singapore is experiencing economy downturn, the retrenchment rate is rising. In the event of retrenchment, despite having one month salary compensation, you are expected to have at least 6 months worth of savings (after you minus the expenses) to keep you financially afloat.
Hence, this is why you should always have an emergency fund!
How much do you need for your emergency fund?
First thing first, how much do you need to your emergency fund? How much is considered enough?
There is no absolutely answer but it is good to always follow a guideline and it also depends on your monthly income. If you are expecting a fixed income every month, the possibility of saving up for an emergency fund will be more easy peasy as compared to those doing part time casual jobs. Having a fixed income monthly will be easier as you have a calculations as to how much cash flow you are expecting each month.
Ultimately, the most ideal plan will be building an emergency fund of at least 6 months worth – factoring the remaining monthly savings after you minus the expenses such as insurance, utilities, transportation, groceries, credit cards repayments and etc.
How do you build your emergency fund?
There is absolutely no short cuts to save up an emergency fund. It boils down to a few factors such as your financial situation, you individual discipline and determination as well. Emergency fund might take slightly longer time to build if your monthly salary is acceptable whereas your expenses are very high. But then again, you know that everyone has to start somewhere and it is essential to start building because you are unable to foreseen any unconventional events.
Let’s say for instance, you make a fixed income of S$4,000 a month but your liabilities take up about S$3,000 – that leaves you with about S$1000 a month to put into your emergency fund. If you need at least 6 months’ worth of expenses to build up your emergency fund – that means you’ll need at least S$18,000 – which will take you 18 months to build if you put in S$1000 every month.
Do remember that it is not all about the speed, it is about the process and getting there. No matter you take how long, I am sure you’ll reach your goal eventually. There might be distraction along the way but you should know what’s best for yourself. If you have free time on your rest days, you might want to take up side income to help you achieve your goals.