Rules for the formation, storage and spending of the personal reserve fund. What should be a financial safety cushion. How to create and use it.
In any budget, be it the budget of the state, region, city or enterprise, there is always a reserve fund - a certain reserve of funds that can be used in the event of an unforeseen situation. The same reserve fund must necessarily be in the personal or family budget. Recently, it has become known as the "financial safety cushion".
The standard amount of financial cushion is 6 average monthly expenses. That is, it should be enough for 6 months of use in the event that a person or family completely loses their earnings. If earnings are irregular or a time of increased risks comes (for example, a financial crisis), it is advisable to increase the size of reserves by 2 times - up to 12 average monthly expenses.
It is necessary to form a financial cushion regularly, setting aside at least 10% of budget revenues until it is fully formed. In case of some unforeseen income, you can immediately postpone 50%. In any case, the more you save, the faster the pillow will form.
Store these funds so that they are instantly available at all times. At the same time, it is desirable that the financial cushion be protected from inflation and devaluation, that is, it should not be depreciated. For example, you can store reserves on current deposits with the possibility of partial withdrawal or in foreign currency (dollars, euros).
You can use the financial cushion only in case of force majeure situations requiring expenses. That is, such situations that came suddenly, you could not foresee them. For example, upon dismissal from work (until a new source of income is found), in case of illness (costs of treatment and medications are required), in case of unforeseen repairs (a pipe broke, a car had an accident), etc.
If you simply do not have enough money before your paycheck, this is not a force majeure situation, it is the result of a lack of financial planning. In such cases, you cannot spend the financial cushion. Also, you cannot spend it to make large purchases (another financial asset is intended for this purpose - savings) and for investment purposes (personal capital is needed here). Do not confuse and mix different types of monetary assets.
After the pillow has been spent, you should immediately begin to replenish it, and do this until it is again formed in the required volume.
A financial safety cushion is the first and foremost financial asset of an individual or family. If you don't have a pillow, don't start building savings or capital. As a last resort, you can shape it all at the same time.
And most importantly, having a financial cushion will immediately transfer your level of financial condition from financial instability to financial stability. Because you will already be protected and insured against the onset of negative force majeure, you will not have to almost go into debt. Therefore, the need to create this important asset should not be neglected.
