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Unexpected Expenses Derail Retirement Dreams: The Importance of an Emergency Fund
3 Oct
Summary
- Experts caution against focusing only on investments without building a financial cushion
- Sudden medical crisis forced a client to liquidate long-term investments at a loss
- Chartered Accountant recommends setting aside at least 6 months' worth of expenses as an emergency fund
As of 2025-10-04T04:07:21+00:00, experts are cautioning that focusing solely on investments without building a financial cushion can put long-term financial goals at risk. This warning comes in the wake of a recent client experience shared by Chartered Accountant Nitin Kaushik.
Despite being financially disciplined, Kaushik's client had no emergency fund in place when faced with a sudden medical crisis last month. To cover the unexpected expenses, the client was forced to liquidate their long-term investments at a loss, disrupting years of careful financial planning.
Kaushik has underlined the importance of establishing an emergency fund as the foundation for financial stability and freedom. He recommends that individuals set aside at least six months' worth of expenses in a liquid, easily accessible account, such as a fixed deposit or a liquid fund. This financial cushion, he explains, can prevent unforeseen circumstances from derailing long-term wealth-building goals.
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The Chartered Accountant emphasizes that financial freedom does not begin with investments alone, but with financial security. By ensuring a robust emergency fund is in place, investors can continue pursuing their long-term objectives without fear of setbacks caused by unexpected events. Kaushik advises that this foundational step is crucial in helping people move steadily toward achieving lasting financial independence.
