How to build up an emergency fund before you start investing.

As long term investors, we are not expected to sell our stocks to fund our short-term expenses.
 

• Market corrections, on average last up to 1.5-2 years

  • selling the stocks when their values have decreased will lock in the losses.

  • hence it is not a wise thing to do so.

A good rule of thumb is saving up at least 3 - 6 months of expenses.

• Refer to: Dave Ramsey's 7 baby steps

This is a template I have created to help you build & keep track of your pool of emergency funds.

• Emergency fund builder template

• download it & amend it where you see fit.

Personally, I would prioritise on achieving at least 3 months of emergency funds first.

Then from then on, my monthly savings from my income will be split accordingly to both my:

• Emergency funds pool

  • so it will continue to reach the 6 months benchmark.

• & investment funds

  • so I am able to start my investment journey too.

If the market is quite overvalued

• it will be wiser to hold back your investing

• and focus on building your emergency funds to the 6 months mark first.

This will be the best time to start shortlisting companies/ assets you are interested in

• and perform your due diligence

• so hopefully by the time when you are ready to invest

• you would have built up your conviction for the assets of your choice.