Picture this: everything is going well, and you're driving to work when suddenly your check engine light comes on. You think nothing of it and drop your car off at the local mechanic. A day later, you receive a phone call informing you that your car's Engine Control Module isn't working properly, and you're faced with a $1,000 bill. How many other situations like this occur, when everything seems fine and then—boom—life happens, and a bill comes along with it.

But what happens if you don't have enough money in your bank account to cover these unexpected expenses? Some people turn to their retirement accounts, take out loans, or swipe a credit card. However, all of these options can hurt both your current and long-term financial goals. That’s why it's so important to have an emergency fund.

An emergency fund acts as a buffer or safety net that can help you manage life’s unexpected expenses without relying on debt or disrupting your long-term financial goals. Generally, an emergency fund should contain between three and six months of living expenses, kept in an easily accessible account like a savings account.

For certain individuals three to six months of living expenses may not be enough. If you're self-employed, work in a volatile industry, or have dependents, you may want a larger cushion—and that's completely understandable. The goal of an emergency fund is to reduce financial anxiety and give you confidence.

It's also important to keep in mind that having too much in your emergency fund can expose you to inflation risk and opportunity cost, as emergency funds are generally held in accounts that earn less than inflation. Once you've reached an adequate emergency fund based on your situation, it’s wise to explore other ways to budget your excess funds such as repaying debt or going towards your financial goals.

So, how do you fund your emergency fund? First, you or you and your spouse should sit down and determine what amount feels comfortable. Once you've agreed on a target, allocate funds within your budget to build your emergency fund. This might mean sacrificing a few months of "fun money," but that short-term sacrifice can help protect your current and long-term financial goals while reducing financial anxiety.

Jack Syryczuk is a registered financial advisor with LPL Financial. The information in the article is for general education and informational purposes. Jack can be reached by contacting Adam Smit Investment Management at 715-644-3434 or online at www.adamsmitim.com. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.