Can you handle it when your entire wealth becomes an emergency fund?

Published: March 31, 2017 at 10:24 am

Last Updated on December 19, 2021

Two of my close family members had health scares in the last couple of months. One of them realised (by chance) there that communication between the heart and brain was faulty. The other had a cardiac arrest and was revived. In both situations, there was mention of a pacemaker – a device that sends electrical pulses to trigger normal heart motion. No emergency fund would be sufficient to handle such expenses! Is there a way we can handle the financial implications of such sudden developments better?

Before we begin, my book with PV Subramanyam, You Can Be Rich Too is available at a 50% discount (Rs. 198) for short periods of time this month as it was among the top 25 bestsellers in the last 3 months. Grab it now! Thank you for your support.  The book reached the top of three sub-categories and the top 75th  across all categories (see image below). May not sound like much, but not all authors are lucky to enjoy the trust and support from readers.

The costs are high – one estimate given for the pacemaker was 12 Lakhs and another 24 Lakhs (I don’t know the specs/requirements). The point is that most of us are not going to have that kind of cash as an emergency fund, unattached to any other goal. Most of us are not going to have a health insurance large enough to cover such costs. We will have to dip into our retirement or child education corpus to fund such needs.

These ailments are not critical or debilitating in the sense that the person after treatment can still lead a reasonably normal life within adaptable limits.  So life goals like retirement, child’s education etc are still relevant. The monthly expenses would also increase significantly due to treatment costs (lifestyle creep can cut both ways).


Build a complete financial plan with our Robo Advisory Tool. More than 1000 investors and financial advisors use it!
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)


New Tool! => Track your mutual funds and stocks investments with this Google Sheet!

We certainly cannot avoid such situations by “leading a healthy lifestyle”. Sure, it will help, but a probability is not the same as a possibility. And most us have an implicit  “it can’t happen to us” attitude.

There is no way we can prepare for such developments – emotionally or financially. So I have only one point to convey: If we can handle foreseeable situations well, we stand a reasonable chance against unforeseeable situations.

Photo by Tim Regan

“Handling well” has four parts:

(1) Invest as much, as early

I am sure you must have heard of “invest as much as you can, as early as you can”. This is not just about the power of compounding and building more wealth. Our ability to invest may not be the same in future. In our late 30-s and early 40-s, chances are, we will have some lifestyle disease to manage. Chances are, the health of our parents may deteriorate. These will affect our ability to invest.  Sadly, most of us realise, invest – as much, as early only in hindsight.

(2) Avoid Redemptions – they destroy wealth

The more important aspect is redemptions. If we can list all our foreseeable expenses along with a plan to handle them, we can minimise redemptions. For example, if we did not account for an expense that is likely to occur 5 years from now, chances are, we will be redeeming from our already invested wealth intended for other purposes.

Regular investing creates wealth, but a single redemption can destroy the fruit of years of investing. So the number one rule of wealth management is to avoid redemptions for needs that could have been planned for.

(3) Never stop contributing to the emergency fund

The silly thumb rule, “have six months expenses as an emergency fund” has no basis. Besides expenses increase all the time. So even for simple emergencies, a healthy emergency fund is necessary. I would recommend putting away 5-10% of the take home pay (or pension) into the emergency fund – for life.

(4) Keep increasing health insurance cover

Either every year or every few years, increase your health cover. Add a super top-up or increase its cover.  It is expensive, but it might come in handy one day!

With some luck and discipline, (1) + (2) + (3) + (4) + a few uneventful years should give us enough wealth to use as an emergency fund!

New Delhi DIY Investor Workshop April 23rd, 2017

Register for the New Delhi DIY Investor Workshop April 23rd, 2017

You Can Be Rich Too With Goal-Based Investing

Happy to announce that my book with PV Subramanyam has been selected as part of Amazon Best Reads Mar 2017. Now 50% off! Thank you for your support and trust. If you have not yet got the book, check out the reviews below and use the links to buy.

Ranking at 9 pm, 31st Mar 2017.

Reader Quotes:

Gift it to your Friends and Relatives whom you care more. Already follower of Pattu and Subra’s forum. Ordered 4 more copies to give gift to my friends and eagerly waiting to read

The best book ever on Financial Freedom Planning. Go get it now!

Your first investment should be buying this book

The (nine online) calculators are really awesome and will give you all possible insights

Thank you, readers, for your generous support and patronage.

Amazon Hardcover Rs. 199. (50% off)

Kindle at Amazon.in (Rs. 307)

Google Play Store (Rs. 307) If you purchase the first book they give 75% discount to promote online e-book purchase. Subsequently, they provide 50% on next book. No code required.

Infibeam Now just Rs. 307 24% OFF.

If you use a mobikwik wallet, and purchase via infibeam, you can get up to 100% cashback!!

Bookadda Rs. 344. Flipkart Rs. 359

Amazon.com ($ 3.70 or Rs. 267)

Google Play Store (Rs. 244.30)

  • Ask the right questions about money
  • get simple solutions
  • Define your goals clearly with worksheets
  • Calculate the correct asset allocation for each goal.
  • Find out how much insurance cover you need, and how much you need to invest with nine online calculator modules
  • Learn to choose mutual funds qualitatively and quantitatively.

More information is available here: A Beginner’s Guide To Make Your Money Dreams Come True!

What Readers Say


Do share this article with your friends using the buttons below.

Use our Robo-advisory Excel Tool for a start-to-finish financial plan! More than 1000 investors and advisors use this!
  • Follow us on Google News.
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Join our YouTube Community and explore more than 1000 videos!
  • Have a question? Subscribe to our newsletter with this form.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)
 
Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.
  Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)