If you have taken any student loans to fund your college education you can expect to spend a major portion of your earnings trying to reduce your debt after you graduate. If you plan well, things should move along smoothly and you should be able to repay the loan within a few years of consistent repayments. That’s in theory of course.
Creating an Emergency Fund
The reality is, life is full of surprises and some of them will require you to have some funds readily available. That is what emergency funds are—to meet those unexpected expenses. So how exactly are you supposed to create an emergency fund while still meeting your repayment obligations as well as your everyday expenses?
Setting Up a Budget
One of the best ways to do this is by setting up a monthly budget for yourself. From your earnings, first set aside the minimum payment that you must make every month. This is non-negotiable. The consequences of non-payment can roll over and result in you paying much more in the end.
After you’ve set aside what you need for your monthly loan payment, set aside what you need for your rent, food and other essentials. Remember to make the distinction between essentials and luxuries. This is absolutely crucial. Setting a budget for your weekly groceries is essential. Setting a budget for a lavish weekend brunch isn’t.
Every Little Bit Counts
When you are just starting out, you may find it difficult to keep a large amount towards your emergency fund. That’s okay. Start with a small amount every month while you focus on reducing your debt. Every little bit counts and this will grow to be a substantial amount with time.
Everybody will develop their own strategies for this purpose depending on their earnings, their lifestyle, and their other commitments. Whatever plan you implement, one thing is for sure, creating an emergency must be an integral part of your financial planning.
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