What is a Contingency Fund?
A contingency fund is simply a reserve fund set aside to handle unexpected debts that are outside the range of the usual operating budget. This model of maintaining reserve money as protection against possible loss in the event of an emergency situation can be utilized in a number of situations. Governments, private businesses, and even individual households can establish and maintain a contingency fund as part of the overall financial plan of operation. In a government setting, the contingency fund is often identified as a disaster recovery fund or disaster assistance fund. Generally, the terms of use for the reserve money placed into the fund will be clearly defined. This action makes it possible for local and national governments to provide assistance to citizens and municipalities when some type of natural or economic disaster takes place, provided the event meets the qualifications set in place for the fund. At other times, a government may establish a contingency fund as a backup
Everybody knows that its important to save money, but by and large, most of us have a hard time doing it. Life just costs a lot you have your rent and mortgage, college tuition, car payments, cell phone bills, credit card bills, and even plain old grocery shopping. But as hard as it is, its still in our best interests to set aside money for any emergency that might arise. Governments and municipalities do just that all the time, in the form of a contingency fund. A contingency fund is expressly created to be used in emergencies, such as a natural disaster. In the world of high finance, a contingency fund is set aside in order to protect against big losses. But contingency funds are not just the province of governments and corporations individuals can set up contingency funds too. When a government creates a contingency fund, it is money to be used in case of dire emergency, like a serious flood, or devastating fires. The money can only be accessed if circumstances meet the conditions l
A contingency fund is over and above the money you put aside for your child’s education, the house you plan to buy 10 years down the line, your daughter’s wedding, a family vacation to the Maldives etc. Those funds have a name to it. Contingency funds are for miscellaneous expenses that come up out of the blue. But nevertheless you need to be prepared for them. For instance, your aged dad’s medical bill, sudden house repairs and maintenance, loss of job or sudden long distance travel are not things you plan for. You should never use your contingency fund for luxuries like a plasma TV, a swanky car or even a vacation. Also read: Why personal loans are a no-no Where to get the money? An important question that might come to mind when saving for a rainy day is ‘Where do I get the money from?’ Well, you don’t need to punish yourself to save for this fund. As and when you are able to put aside money, do it. Also read: Financial planning for women A credit card is extremely useful in emergen
The Lender and the 203k Inspector will want to see that there is 10-15% of the total expected cost of repairs added to your loan amount for “unforeseen” items. Depending on the overall condition and your ability to ‘see’ all that needs to be seen in order to do a proper cost estimate, you will need 10% or 15% or even 20% in some of the more difficult rehab projects. If you are purchasing a Foreclosure, a SCOPE property or some other “distressed” real estate, there is a good chance that you will not have all utilities functioning at the time you are making your buying decision and estimating the cost of repairs. Some of these situations require a little more planning for unforeseen items. After all, among the worst things that can happen is that you run out of money and cannot finish the job! No one wants that to happen.
