For emergencies only!

Currently, many people are wanting to know about finances and how to manage their money in the best possible way. Therefore, there are basic questions and steps to be followed before achieving financial independence, such as building an emergency reserve.

Having an emergency reserve is the first step towards actually having a stable financial life! So, what is an emergency reserve and how do you start building it? Continue reading and learn all about this very important practice in managing your money!

What is an emergency reserve?

The emergency reserve consists of saving and investing your money for unforeseen events or, as the name implies, for emergencies. At the time of the squeeze, having money saved can help you "hold the ends" and you won't have to be desperate and helpless.

The emergency reserve is equivalent to six months of your cost of living and should only be used as a last resort, as personal security for occasions that will require financial resources.

But how do I know my cost of living? You need to calculate your monthly expenses (fixed and variable) along with your salary, obtaining an x value that represents the cost of your lifestyle.

For the emergency reserve, the goal is really not to need to use it! Keep in mind that money is not for every occasion, just for moments like:

• Unemployment

• Health problems

• Maintenance or urgent repairs at home and car

• Expenses with unforeseen bureaucracies, documents or authorizations

However, everyone knows their condition and what are the situations that require their reservation, so it is up to you to reflect and be aware of what is a priority and, in fact, an emergency.

How much should I save for the emergency fund?

Before starting to add your reserve, you must pay off your debts and draw up a personal financial plan, taking into account your cost of living and how much you can save per month, without compromising your daily life or ending up in debt.

To know how much to save, you must analyze how stable your income and expenses are, because the greater your financial instability, the more money you will have to save.

The amount itself doesn't matter much and there is no definitive amount for it, but you should take into account a few factors:

• Stable job

• Number of people dependent on you

• Possibility of having unforeseen expenses

• How well are you and your family members doing in terms of health and money?

• Debts and installments

Therefore, analyze your day to day and define a reasonable value for your emergency reversal.

Where to keep the emergency reserve?

In addition to knowing how to put together an emergency reserve, you should keep in mind where to deposit it, to make your money go further and not incur losses. In addition, it is recommended that the redemption of the money be immediate, that is, easily accessible, because, when an unforeseen event arises, you will be able to use the money without any obstacles.

To know where to keep your money, you need to analyze some factors:

• Liquidity: ease of withdrawing money

• Low cost: low administrative and income tax costs

• Security: FGC coverage or provision of security mechanisms

• Low volatility: low fluctuations in your equity

From there, there are several places to invest your reserve: Selic Treasury, Daily Liquidity, Fixed Income Funds, etc. However, it is up to you to decide which of these options will be most advantageous.