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How To Deal With Money Emergencies

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Dipping Into Your Life Savings

This article is Part 4 of 5 of
Your Total Guide to Managing Life Savings: Exposing The Best-Kept Secrets

 

problemsMoney emergencies are a fact of life. When  faced with such a situation, the practical and immediate solution outweigh other options, especially in life-threatening moments or in instances when one’s survival and those of his or her loved ones are being threatened.

When it comes to life savings and money emergencies, there are actually three most common questions that pop up. Here they are, and our simple take on how to approach them.

WHEN IS IT OKAY TO EXTEND YOUR LIFE SAVINGS AS A CONTINGENCY FUND?

There are a few instances when dipping in this major egg nest is the right thing to do. These include a mix of financial unpreparedness, savings inadequacy and despicable life lemons.

  1. The first is the obvious instance: when you do not have an emergency fund, and something very important and urgent came up, like a major car repair which when not done will jeopardize your job or your business.
  2. Job loss. Your life savings will definitely be the one to come to the rescue.
  3. A life-threatening case where your emergency fund proves inadequate to get you out of a rut. It could be you or a loved one’s emergency health situation that calls for major procedures like surgery or operation.
  4. The fourth instance may be subjective, since it can be viewed as an emotional spending or as a can’t-be-turned-down act of goodwill: when someone is in dire need of financial assistance (could be a life-threatening situation) and you are the only person who can help. In this case, it is up to you to use your better judgement and instinct. This is also one of those instances where your views about money and its use and importance would come in.

HOW MUCH SHOULD YOU TAKE OUT OF YOUR LIFE SAVINGS DURING EMERGENCY?

An important question that arises when emergency fund and life savings fund are combined, or when the emergency fund is not enough: How much do you take out when an emergency hits?

The practical answer will be to take out as much as the emergency requires.

WHAT ARE ‘EMERGENCIES” THAT MUST BE KEPT HANDS-OFF FROM LIFE SAVINGS?

These would be “emergencies” that are really not urgent or even remotely important, but some people tend to view as life-threatening or a kind of an it’s-now-or-never situation.

  1. Stock trading because of media hype, a friend’s enticement or an advertisement.
  2. Investing in a business of others without any plans, just visions and imaginations.
  3. To use as gambling money because you have a “winning streak.”
  4. Change in major plans. For instance,  you want to buy a house now instead of in the next five years as you originally planned to take advantage of a “sale,” a promotion or low market price.
  5. Emotional spending, where a weak moment turns into rebellion and you seek revenge from the cruel world by totally using your life savings for things that it is not meant for.
Read more:  Life Savings 101: Taking Control of Your Money, Your Life

It’s not really money that makes us comfortable and secure, but organized money management. Reality check is, money comes and go in our lives because that’s the natural way of things. We work, we earn, we spend and we save to perpetuate the cycle of our productivity and survival. It is always a nice thing when money comes, but some people find it hard to let it go. But with a well-laid plan for money and its use, particularly a life savings, one has a good understanding of the purpose of a methodical and stringent saving – to accomplish higher life goals and be proud of one’s work and discipline when that future is already here.

Do you want to know the biggest mistakes people make after spending their life savings?

Continue reading PART 5: How To Lose A Life Savings in A Few Days

 

By Louie Andre

B2B & SaaS market analyst and senior writer for FinancesOnline. He is most interested in project management solutions, believing all businesses are a work in progress. No stranger to small business hiccups and drama, having been involved in a few internet startups. Prior to his for-profit ventures, he has had managed corporate communications for a Kansas City-based Children International unit.

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