Before you begin your investment journey, setting aside an emergency fund is actually the top priority, as it allows you a buffer in case of emergency. Well, this is what an emergency fund is for, hedging against loss of job, injury, illness, or other sudden unexpected major expenses. Home renovation and holidays should not be tapping in this account.
Emergency fund needs to be kept in a liquid savings account, rather than bonds or stocks, to protect against market fluctuation when you need cash. You will never know when the emergency strikes, and you will not want to be forced to sell bonds/stocks at a less than ideal price.
How much cash to accumulate for your fund is personal and depends on your situation. As a guideline, most will recommend 3-6 months of expenses, but being more conservative, I am more comfortable with 9-12 months. So for a expenses of 2k monthly, I would think a comfortable emergency fund would be about 18k-24k.
This amount is not a small sum. It may be a good idea to consistently accumulate this amount, and the faster this is achieved, the faster you can start planning for investments, and savings for other purposes. Last but not least, always resist the temptation to tap into this account, unless it is really an emergency. After any use, remember to top it back up where possible, so you maintain a good financial standing. And do not forget to re-evaluate your financial situation from time to time, so you can revise the amount needed to be set aside.
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