Emergency Funds for the Festive Season

As a child, when we used to think about festivals, we used to get all excited as there would be lights, sweets, gifts, family time, friends meetups, and whatnot. As we grew up, the child inside us might get excited in the same way, but our adult self starts calculating the extra expenses that are coming our way, doesn’t it? 

As Diwali this year is just knocking on the door, you must be decking up your home, friends and family will come over, lots of gifts to purchase, or you may be planning a trip this Diwali, and all these mean extra expenses until you have an emergency fund for the festivals. 

Wondering what an emergency budget is, or how much emergency fund I should have, or maybe how to build an emergency fund? Don’t worry, we’ve got you covered. In this article, we will talk about Emergency Funds for the Festive Season and how you can build one to cherish the festivals with your loved ones without worrying about your pockets. 

What is an Emergency Fund?  

As you may know, an emergency fund is an essential part of financial planning. It can be defined as a fund that you build especially for meeting any sudden expenses that come your way. This fund is not meant for any planned expenses or financial goals, but as life is unexpected and money is crucial, especially to navigate unexpected situations, having an emergency budget intact can help. 

For instance, you are going to the office and suddenly your car breaks down, so you must not have thought this through while planning your budget for the month, so this is an extra expense that you have to bear. Likewise, there can be medical emergencies, job loss, sudden repairs, or family needs coming up that need a significant amount of money, and for all these and any other unexpected expenses, an emergency fund is essential. 

How much emergency fund should I have?

Now you must be thinking about how much you should have as an emergency fund, aren’t you? So, here is a rule for deciding the amount you must have in your Emergency Fund Account, and it is the 3-6-9 rule for emergency funds. 

• 3 means 3 months of monthly expenses as an emergency fund if you are single, with a stable monthly income, and minimal dependents on you. 
• 6 means months of monthly expenses as an emergency fund if you have a nuclear family or individuals with dependants and EMI or other monthly obligations
• 9 means months of monthly expenses, which is recommended for a self-employed individual with irregular income flow

 You can use an emergency fund calculator to find out the exact amount you need to have in your emergency fund account; however, the higher it is, the better. 

Emergency Funds and Festivals 

During festivals, the chances of unexpected expenses increase significantly, while surprises can bring joy, but they can also bring new expenses, isn’t it? So, emergency fund planning for festivals is necessary. 

Now, here are a few things you need to keep in mind that often people get confused about. Emergency Funds for the Festive Season doesn’t mean the amount you have saved for funding the festival. Let’s understand this. 

Suppose you have budgeted around ₹20k for this Diwali spending, which includes gifts, Diwali crackers, sweets, and other food items for the Diwali celebration and guests, buying new clothes, and other things for your family. 

Now, suppose your best friend has come over for Diwali and he or she is asking you to plan a short weekend trip for Diwali celebrations. As you didn’t include this in your festival budget, the cost for the trip can be a burden on your pockets or savings, and sometimes people end up taking debt to finance such activities. 

However, this can be taken care of without letting go of the opportunity to go for a trip with your best friend, while not worrying about the finances, just by having an emergency fund for the festivals. Suppose you have built this fund and have 2x of your festive budget in the fund, which means ₹40k in your case, and with that, you can not only go for a weekend trip but also for a week-long trip to your favorite destination with your best friend. 

How to build an Emergency Fund for the Festive Season?

The next thing you must be thinking is how to build this emergency fund for festivals, and here are the steps that you can follow – 

• Slow but steady: Building an emergency fund, whether for general purposes or festivals, requires patience. It is not a one-day job unless you have won a lottery. So, you need to keep aside a portion of your income every month to build the emergency fund, and this cannot be from the regular investments you make. So, if you are let say, saving and investing 30% of your income every month, now for building the emergency fund, you need to keep aside another 10-20% of your income every month until the fund is built. You need to start and be steady with it without rushing to build an emergency budget within the blink of an eye, as that will only get you stressed, nothing else!
• Automate the process: You can open a new bank account in a different bank from your original savings or salary account and then automate a transfer of a particular amount every week or month to the new account from your original account. This way, you can keep on building the fund, and you do not even have to remember the date for transferring the amount, and it’s a more disciplined approach. 
• Wisely Use the Windfalls: While slowly building up the fund is the best way to do it, if there is a windfall, such as a Diwali bonus or tax refund coming your way, why not just put it in your emergency fund to boost it up? This can even help you build the fund faster. 
• Keep an Eye: Finally, you need to keep an eye on expenses as they evolve, and so you must upgrade your fund with time as well. 

Wrapping Up 

So, for being financially stress-free this festive season, start building your emergency fund for the festive season today with the steps mentioned above. If you have bought the Diwali bonus, add it to the fund to supercharge it, but don’t be stressed, even if you start today and take it slow, by next year, you will be all relieved and can enjoy the festivals in a much hassle-free and stress-free manner. 

Emergency Fund for Festive Season | FAQs

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