Renting instead of buying a property certainly has its fair share of perks. The big one: maintenance and upkeep. If a major bug infestation occurs or the dishwasher sputters its last breath, the landlord is generally the one in charge of forking over the cash to fix the problem.
However, emergency funds are still a necessity if you’re signing a lease instead of a mortgage. Life happens, and although you may not be facing foreclosure should your financial situation suddenly change, an emergency fund can be the cushion you need to keep your head above water in any situation.
If you’re a renter, here are a few reasons why you still need that emergency fund.
#1: Your landlord can raise your rent without much notice (really)
While many states prohibit a rent increase during the term of a lease, if you’re renting on a month-to-month basis, you could be obliged to pay an increased rate with as little as 30 days’ notice.
States such as New York and Texas allow rent increases if both parties consent to the change. However, if the tenant doesn’t agree to the increase, they must terminate their lease. In other words, inaction legally indicates approval on the part of the tenant.
No matter where you live, it’s always important to read the fine print carefully. Even if you have a long lease, your agreement could state the landlord has the leeway to raise your rent before the next rental period.
Bottom line: You could be on the hook for either higher rent or the costs to move into a new unit.
#2: Disaster can strike anyone, at any time
We’ve all had those weeks or months when everything imaginable seems to go wrong at the same time — the car suddenly needs a major repair, a long-forgotten doctor’s bill comes in the mail, and the dog needs emergency surgery after consuming a pound of chocolate.
Unfortunately, these situations don’t wait until we are financially prepared to handle them — the preparation has to occur before they happen. Ideally, you’d have enough stashed away that you have emergency rent money for three months should you lose your job — giving you time to find a new (better!) job without having to settle for a less-than-stellar offer just because you need some emergency rent money.
#3: Paying off debt? You still need that emergency fund
Debt payoff may be front and center in your mind, but that doesn’t mean you can afford to forgo having an emergency fund.
Think about this: After spending months and months paying down mountains of debt, you suddenly find yourself without a job or left with an avalanche of unexpected medical bills. Now, with no emergency fund and lackluster job prospects, you have one option — pulling out those credit cards and putting yourself back into the debt cycle.
While you might be tempted to funnel all available funds into making your dreams of debt freedom come true, an emergency fund will ensure you don’t meet any brick walls on your path.
#4: Lessen your money stress
In a survey conducted by the American Psychological Association, 72% of respondents reported feeling stressed about money in the previous month. A whopping 64% reported money was a somewhat or significant source of stress in their lives.
One of the most stressful aspects of money management is dealing with circumstances we’re not financially prepared to handle. What’s the remedy? Building an emergency fund for peace of mind.
Have you ever needed your emergency fund? Share your savings tips and experiences in the comments!