1. 10 Important things to keep in mind for Contingency fund planning: these are essential criteria for a well planned Contingency funding. In my opinion, this should be on top priority of everyone.
  2. You may have made good plan for your financial future but one plan does not come with actual planning, that is Contingencies... when they come, like an emergency, you need to have the money in hand!
  3. Emergencies like an accident or illness or loss of job or market crashes or seasonal fluctuations or change in economic conditions are some events that one needs to think over carefully and make plans to get funds made available on such situations
  4. How much and how does one calculate, well it is easy as you know your industry and job or business well, so if you think 6 months are the minimum and 12 months is maximum, then that the right kind of monthly expenses into 6 or 12, is the amount that you need to keep for contingencies
  5. These funds should be kept solely for this purpose and should not be considered for any other goals, only then these funds can remain secured and well planned.
  6. Liquidity is critical: lets say you need Rs. 1 lakh out of your 6 lakhs, then Rs. 1 lakh should be coming to you in hours
  7. Safety: these funds should not be so much planned for their return but more for safety and your own financial security, as once done, you would feel so great having that kind of money with you safely.
  8. While these funds can be kept in safe savings account, but should some where earn more that the inflation, else they would tend to erode with time and importance of their being there may become redundant, so there are many short term liquid mutual funds that well serve this purpose and hence major part of your contingency funds should be kept there.
  9. Taxation: if you are in the 20 % or 30 % tax bracket, then it is worthwhile to consider funds more optimised than just FD as FD may take away 30 % of the return that you are going to get on your contingency funding.
  10. Keep learning: read more about such funds, the importance and all the options to keep abreast of the latest and trust your financial planner.

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