2. Fill Your Contingency Fund

Contingency or emergency funds are not only for the nation. We too require contingency funds. The sole purpose behind having a contingency fund is that it acts as a reserve source of money. So, in case you face loss of job, medical emergencies or family engagements, this acts as a reservoir of money. This is especially true if insurances do not cover particular areas. It is always advisable to have cash in hand at the bank. Always set aside a decent sum of money to meet such unforeseen events and do not touch it until needed. In order to have a proper Contingency Fund, which should equate to a minimum of your cash outflows for 6 months. It will be even better if you could escalate this limit to at least 20 to 24 months. For example – if all your expenses (EMIs of car and home loans, regular home expenses, investments and the like) add up to 1 lakh, your contingence fund for 6 months will be 6 lakh. Keep aside an additional 4 to 5 lakh for medical emergencies. As inflation goes up each year, revise your final contingency fund by about 8 to 10 percent.