Everybody always talks about the importance of having an emergency fund. Ask any expert and you’ll get the same answer – start building your emergency fund as soon as possible.

But if you don’t understand the importance of having an emergency fund, you’ll never make it a priority. Let’s look at 5 of the biggest ways having an emergency fund can change your life.

It Will Help You Sleep Better At Night

Many Americans lose sleep over their finances. The majority of people feel their finances are controlling them, instead of them controlling their finances. That’s a pretty powerless position to be in.

Emergency funds can help shift that balance of power though. Imagine how much better you’d sleep at night knowing you had a hefty $5,000 or $10,000 sitting in the bank if you ever needed to tap into it.

That would be enough to help anyone sleep more soundly. The security and peace of mind an emergency fund can give you is one of the best reasons to have one. There’s enough to worry about in this world without adding money to the list.

It Can Protect Your Credit Score

Your credit score is one of the biggest deciding factors when it comes to whether you can land a loan and what the rate will be. An emergency fund can let you keep that credit score in the excellent category you need it to be in.

If you lose your job, your emergency fund will help you keep paying your bills on time until you can land a new job. That will keep your credit score intact.

It Can Help You Pursue a Life-Changing Move

If you’re offered the job of your dreams out of state in an expensive city, you might not be able to take that offer if you don’t have the funds saved up. That emergency fund can help you make the deposit and first month’s rent on a new apartment, hire a moving van to cart away all your possessions, and tide you over until you get your first paycheck.

It Can Open Up Medical Options

Do you have a medical condition that’s bothering you? It might not be severe enough for an emergency surgery, but your doctor has been warning you that you should take care of that hernia at some point? An emergency fund can let you get the surgery that’s going to make you feel better without creating a huge drain on your finances.

The beauty of an emergency fund is that you won’t have to go further into debt when you are facing a medical crisis.

It Can Let You Choose a New Career Path

Have you finally gotten tired of your one-dimensional job with the glass ceiling? If so, your emergency fund may come to your rescue.

Whether you’ve had it with your current career or you want to pursue something more lucrative, an emergency fund can be a great start toward pursuing the education you need to make your dream career a reality.

If you have a hard time sticking to traditional budgets because they are far too much work and don’t give you enough flexibility in your purchasing decisions, you might want to check out the 50/30/20 budget, also known as the 50/20/30 budget.

Budgeting with this method can help you feel less deprived, which can help you stick to your budget.

Here is how it works.

The 50 Percent Portion

You’ll tally up all the after-tax money you have coming in during a month, including any part-time income you earn. Then you’ll calculate what 50 percent of that amount is. That’s what you’re going to have to work with when it comes to your essentials.

All your minimum payments on everything – credit cards, mortgages, car payment – go in this portion. It also includes necessities like utilities, garbage service, and basic food and clothing needs.

The goal is to keep this spending to under 50 percent of your overall budget. But for some people, it’s not going to be there at first. You might find it’s at 60, 70, or even 80 percent.

If you stick to this budget, it will gradually even itself out, but it will take time and discipline. If you don’t want to wait that long to get this budget fully operational, you might need to jumpstart your earnings by taking out a part-time job or side gig. You can use that money to pay down debt. As your debt is paid off, your percentage will naturally start to fall more in line with 50 percent.

The 30 Percent Portion

This is the fun part of your spending. This category is for your wants. The wants category covers everything you’d love to spend your money on if you didn’t have responsibilities and obligations. It can be used for that new fancy cell phone you’ve been eyeing or the vacation you’d love to take to Hawaii.

It also covers restaurant meals that go above and beyond your basic needs for food intake. Any expensive or designer clothes will also fall into this category.

Some people find it helpful to withdraw the money for this category and put it in an envelope in your house. It’s harder to overspend when you have to part with cold, hard cash. And every time you look into the envelope, it’s a reminder of how little money you have left for the month.

Once that 30 percent is gone for the month, you don’t get a penny more. And if you can’t keep your essentials to 50 percent, you might need to take additional money out of the 30 percent fun fund to cover it.

The 20 Percent Portion

This is the category that’s going to give you growth and improve your long-term financial position. For that reason, it’s a crucial category.

Any extra debt payments you make toward your credit card, house, or vehicle will come from this fund, as will any investments you make. If you want to give yourself an extra boost, don’t count the pre-taxed 401k money you are contributing at work in this category.

If you bring home $3,000, for instance, that will give you $600 for the 20 percent portion. You might want to stash $200 in your emergency fund each month until it’s fully funded and use the other $400 for extra debt repayments.

Before long, you’ll notice a lot more money in your accounts and less debt on those monthly statements. That’s a double win.