If you have reckless driving or find a constant job relocation a reality, then you will need to estimate the approximate expenses for rebuilding, recovery from accidents, or relocation.
Based on your evaluation of the pattern of emergencies that are likely to unfold, you can yet stagger the maturity payouts to once every six months rather than once every three months so that you get better returns.
Emergencies are a part and bundle of life. So, an emergency corpus is an obligatory component of one’s financial planning.
The bothersome part was the obscurity of the timing of the emergency and the amount that may be required to deal with the emergency.
There are two approaches to ascertain the amount required. The first approach is to based on the amount required on the salary you earn.
So the crisis corpus amount could be three to twelve months of salary.
If you are a self-employed individual, you can base the amount required on your monthly expenses, and it could be three to twelve months of household expenses.
The second approach is to determine the nature of the emergency. If you are genetically predisposed to assured ailments or conditions, insurance may not always include all cases. In such states, find out the comparative expenses for the respective treatment.
Once you have calculated the amount required, your next step is to solve for the uncertainty of the timing.
As you cannot foretell when an emergency may occur, the ideal way to deal with this uncertainty is to stagger the maturity dates of your payouts.
Based on your estimate of the pattern of emergencies that are likely to unwind, you can even stagger the maturity payouts to once every six months instead of once every three months so that you get better returns.
Because your monthly income can take care of every urgent expense, your investments for emergency corpus can be vacillated out so that they mature at interims of three months.
These can be put on auto-renew option so that, if not used towards an emergency, they can start getting returns again, while the next investment due to mature will convert your emergency corpus.