How to cre­ate an emer­gency home fund

Lesotho Times - - Property -

WHILE it is not pos­si­ble to pre­dict the fu­ture and what may or may not hap­pen, it is al­ways a good idea to have a con­tin­gency plan in place to en­sure that you are pre­pared for the un­ex­pected.

This is ac­cord­ing to Adrian Goslett, Re­gional Direc­tor and CEO of RE/MAX of South­ern Africa, who says that it is par­tic­u­larly im­por­tant for home­own­ers to have a plan in place and funds put aside for a rainy day, con­sid­er­ing the long-term na­ture of home own­er­ship.

“Own­ing a home is a long-term com­mit­ment, which means that the home­owner needs to have a plan of ac­tion should their fi­nan­cial sit­u­a­tion change in any way.”

Life can some­times throw you some un­ex­pected turns, so it is im­por­tant to en­sure that there are funds in place to be able to weather the storm and keep your head well above the wa­ter, says Mr Goslett.

He says an im­por­tant ques­tion that ev­ery home­owner should ask is: If I lost my job to­mor­row, would I be in a fi­nan­cial po­si­tion to af­ford my home?

“Un­for­tu­nately th­ese things can be­come a re­al­ity, and pre­par­ing as much as pos­si­ble for th­ese hur­dles will put home­own­ers in a far bet­ter po­si­tion for the fu­ture,” he says.

Ac­cord­ing to Mr Goslett, there are three sim­ple steps that home­own­ers can take to start cre­at­ing an emer­gency fund to use as a fi­nan­cial cush­ion in tough times. While the idea of sav­ing up in an emer­gency fund can seem like a daunt­ing task, he says the thought of not hav­ing one is far more un­nerv­ing.

An emer­gency fund can help home­own­ers fi­nan­cially man­age any event, re­gard­less of whether it is some­thing as se­ri­ous as los­ing their job or some­thing like a burst geyser that re­quires ur­gent re­place­ment.

Un­ex­pected ex­penses do hap­pen, and more of­ten than not at the most in­con­ve­nient mo­ments, so it is good to have some­thing in place to fall back on, he says. He gives the fol­low­ing tips for start­ing on emer­gency home fund:

De­cide on an amount Goslett says that as a start­ing point, it is good to aim for around one month’s net salary, how­ever if pos­si­ble, more is bet­ter.

“Ide­ally around six months’ worth of a net salary is ideal as a sound fi­nan­cial cush­ion, but as this will take time to build up, hav­ing smaller in­terim goals are im­por­tant to help keep fo­cused and mo­ti­vated,” he says.

Home­own­ers who are con­tract em­ploy­ees with a less sta­ble in­come should try to save up as much as pos­si­ble to en­sure that they cover the months when they earn less or don’t earn any money at all.

The num­ber of de­pen­dents a home­owner has will also in­flu­ence the amount that should be saved, as will plans to ex­pand the fam­ily.

Choose an ac­count Ac­count se­lec­tion is an im­por­tant as­pect when look­ing to build an emer­gency fund, as cer­tain ac­counts will yield a higher in­ter­est rate than oth­ers.

How­ever, when look­ing at a higher-in­ter­est-yield ac­count, it is good to con­sider ac­ces­si­bil­ity.

“There is no point to hav­ing an emer­gency fund if the fi­nances can­not be ac­cessed quickly dur­ing an emer­gency. Of­ten higher in­ter­est ac­counts have a longer wait­ing pe­riod be­fore the money can be un­locked and used.”

Ide­ally the money should be eas­ily ac­ces­si­ble and in a low-risk ac­count, says Mr Goslett.

Set up an au­to­matic monthly de­posit The eas­i­est way to build up an emer­gency fund is by ar­rang­ing a di­rect de­posit sys­tem that trans­fers the se­lected sav­ing amount into the emer­gency fund ac­count each month.

“The best time for this to hap­pen would be as soon as the salary is paid into the ac­count; if you don’t see it, you don’t spend it.”

Au­tomat­ing the sav­ings will also take the need to be dis­ci­plined out of the equa­tion and will en­sure that a cer­tain amount is set aside each and ev­ery month, says Mr Goslett.

An emer­gency fund for home­own­ers is cru­cial in as­sist­ing them to ward off fi­nan­cial crises with­out be­ing forced into debt.

“An emer­gency fund is one of the best tools for home­own­ers to build their fi­nan­cial se­cu­rity and in­de­pen­dence,” says Mr Goslett.

— Prop­erty24

AN emer­gency fund is cru­cial in as­sist­ing you to ward off fi­nan­cial crises with­out be­ing forced into debt.

Newspapers in English

Newspapers from Lesotho

© PressReader. All rights reserved.