Tuesday, October 06, 2009

You Need an Emergency Fund...

Road building in Békés, Hungary.Image via Wikipedia

One of the things I have discussed in the past I am going to do it again, and that is the importance of an emergency fund.

Recently there was a story on the news about how businesses are being affected by road construction. Most of the businesses are hurting loosing a large part of their regular business.

While all of them are hurting, several of them are weathering the storm better than others and they specifically mentioned that they had an emergency fund to deal with situations like this.

You cannot hide your head in the sand. One day the road in front of your business will be torn up. You can scream all you want but the work will and needs to go on.

However, it is not just construction that can affect your business. You need to be prepared for any eventuality.

A good emergency fund of three to preferably six months of expenses will get you through most of these kinds of emergencies. If you road in front of your business is going to be torn up for a year, that means that you could have a 50% drop in business and still survive the work. Or if a natural disaster happens and you are not able to open your business for a few weeks, you will be able to deal with the emergency.

Having an emergency fund may be the difference between you staying in business and putting out the going out of business sign.

While mostly focusing on personal finance, Dave Ramsey is a good source of information on getting your finances in order and showing the importance of having an emergency fund.

Reblog this post [with Zemanta]


mack said...

Thanks for sharing such great post, according to me there are numerous reasons when we need such emergency funds. By building an emergency fund you will feel more secure because you are prepared for the facing any financial crisis. For more details on emergency fund refer Emergency Fund

Sofia Britts said...

This only proves that private individuals aren't the only ones that need to have an emergency fund. Even businesses face the possibility of unexpected expenses, so a smart entrepreneur should always have sufficient money that's enough to sustain the business amidst no income. You're right -- emergency funds can make all the difference.