The Covid 19 crisis has bought into sharp focus the importance of an emergency fund for a dental surgeon. Only those dentists who had build up an emergency corpus can sit at home comfortably and update their skills. The others are tensed and wondering how things will shape out.
The importance of an emergency fund is obvious.
An emergency fund is required for every person and family whatsoever may be their age, profession or their state in life. In this article I will try an outline;
- How to form an emergency fund.
- What should be its size?
- Where should it be parked?
Broadly speaking at least three to six months of your expenses should be kept in the emergency fund.
Now for a dentist the emergency fund has to be of two types. Both need to parked separately .
- Personal
- Professional
So please track your monthly expenses and determine how much your average monthly expenses are. Once you arrive on that figure than multiply it by 3 or 6 and that should be the size of your emergency fund.
Similarly track your monthly clinic out goings and arrive at an average monthly figure, multiply by 3 or 6 and that should be your emergency fund for professional purposes.
If you have taken a professional or personal loans at least three months of EMI’s must be safely tucked away for an emergency.
I would like to clarify that by the word emergency fund, I mean the fund you collect to use in case of an situation wherein you meet with an emergency. It would be an illness or an accident of yourself or your family which may leave you in position wherein you cannot work and therefore you will have to fall back on your emergency funds. Malfunctioning of a clinic equipment or household appliance cannot be considered as an emergency. Resist the temptation to dip into your emergency fund for any other purpose except for an emergency.
Some of the emergency funds have to be kept in cash and some can be kept in bank F.D.’s or liquid funds.
Everyone must segregate a part of their income towards their emergency fund. Therefore the size of the emergency fund should increase with every passing year.
Professional Emergency Fund:
There is a possibility that you may not be able to attend the clinic due to a medical emergency or an accident etc. Even if you are unable to attend the clinic some fixed outgoings pertaining to the clinic are still going on and cannot be reduced. A few of them could be staff salaried, rents , EMI on professional loans etc.
The professional emergency fund will be of use to meet these outgoings when you your daily professional receipts have stopped due to any reason.
As would be obvious, the size of emergency fund has to increase before any major life event like marriage, birth of children, children leaving house for higher education, etc.
Do not start your investments unless you first set up an emergency fund.
One of the parameters by which you decide as to when exactly to retire from practice would be the size of your emergency fund.
The mediclaim and health insurance for senior citizens is usually very expensive. So you should have sufficient size of emergency fund for health and medical expenses purpose before you quit active practice and decide to live on your savings.
An emergency fund is like an emergency kit in a dental clinic. Keep it well stocked and review it often and hope you do not require it.
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Thanks and best regards,
Yours Sincerely,
Dr. Veerendra Darakh
