Worried About Job Loss Amid Layoffs? Here’s How to Create a 6-Month Emergency Fund

Seeing the current job market, everyone has that one fear: 'What if I lose my job tomorrow?' An emergency fund is the best way to tackle this. If you have a 6-month backup, a job loss won't break you. Here’s how to build one.

What is emergency fund?

An emergency fund is money you save only for a real crisis. It's not for shopping or luxury spends. Its real job starts when your income suddenly stops or a big medical bill comes up. Experts say you should have enough money saved to run your house for at least 6 months without a salary.

Essential expenses

First, grab a diary and list all your monthly expenses you can't live without. This includes your house ration, electricity and water bills, kids' school fees, mobile/internet recharges, and your EMIs. For example, if your essential expenses are ₹30,000 a month, you need to build a fund of ₹1,80,000 for six months.

Make budgets

People often wonder how they'll get such a large amount together. The truth is, you don't have to build it in a day. Every month, set aside a part of your salary (say, 10% or 20%) for your emergency fund first. Think of it as 'paying yourself first'. This fund will grow drop by drop, and you won't even notice.

Stop overspending

If you want to build your 6-month fund quickly, you'll have to cut down on non-essential spending for a while. Control things like eating out, watching movies every week, or shopping just because there's a sale. By doing this, you can save an extra ₹2,000 to ₹5,000 a month. Remember, a small sacrifice today will bring huge relief tomorrow.

Your savings

Your emergency fund should be in a place where you can access it immediately when needed. For this, you can open a separate savings account or use liquid funds (a type of Mutual Fund) and FDs (Fixed Deposits). Just make sure this money also earns you a little bit of interest and is kept away from your regular spending account, so you don't spend it by mistake. 

Disclaimer: The information in this article is for awareness and educational purposes only. This is not professional financial advice. The figures and methods mentioned are based on general situations and may vary for individuals. Please consult your financial advisor before making any major investment or savings decisions.