Emergency Fund
An emergency fund is just what its name suggests: a fund designated for large, unplanned expenses life may throw at you, like an illness or a car wreck. “People lose their job unexpectedly and have had to figure it out,” says David Wright, a blogger at personal finance website DollarBits.com. “If they had an emergency fund, they could have cash available to pay their rent, utilities, etc. Without that fund, how would you be able to make ends meet?”
But unexpected financial surprises can also be covered by this rainy-day fund. In fact, financial experts advise everyone who no longer afford to pay bills to use some of the money stashed in emergency funds instead of raiding their 401(k) plan.
