Have you started up an emergency fund for the unexpected expenses that may prop up in your life? If COVID-19 taught us anything, you should be prepared as you never know when you have to replace a roof, buy a new furnace, pay for unforeseen medical costs, or even unexpected final expenses.

You also don’t want to drain your retirement accounts to pay for these items as most financial products have some type of surrender charge or early withdrawal penalty. Instead, Annuity Alliance recommends starting an emergency fund separate from your retirement accounts.

When you create that emergency fund, what types of items should you use this money for? Most finance professionals feel the following items below are earmarked for your emergency fund’s use.

• Losing a job. Your emergency fund should cover three to six months of expenses.
• Medical emergency. Any sudden, unexpected health event, such as an emergency room trip, surgery, or injury qualifies.
• Higher costing home repairs or equipment replacement. Leaking roofs, burst pipes, furnace/air conditioning replacement, refrigerator/oven, washing machine/dryer.
• Vehicle repairs. Larger costs to replace major items (transmission, engine, replacement of car), especially if you use your automobile for work-related activities.
• Legal issues. Despite the large cost, you may need lawyer or attorney services unexpectedly due to a car accident, divorce, or other situation.

The idea behind an emergency fund involves being able to have life as normal when something unexpected comes up. It doesn’t mean you can plan a large vacation, invest in some maintenance home repairs, or go on a spending spree. If you set up your emergency fund and follow these guidelines, you should be able to maintain your lifestyle until you can adapt and make changes in your life.

If you are looking to start an emergency fund, it starts with you. If you are looking to start a retirement plan, then connect with Annuity Alliance to talk to an insurance professional.