For many individuals, the path to financial freedom is often associated with long-term investments, retirement planning, and wealth creation. However, experts caution that focusing only on investments without building a financial cushion can put those very goals at risk. One critical but often overlooked step is setting up an emergency fund, which serves as the foundation for financial stability.
Chartered Accountant Nitin Kaushik has underlined the importance of financial security as the first step toward financial freedom. In a recent post on X (formerly Twitter), he explained that individuals often focus on investments without creating a proper safety net, a mistake that can disrupt years of disciplined financial planning.
The cost of skipping an emergency fund
Kaushik illustrated this point through a client’s experience. Despite being financially disciplined, the client had no emergency fund when faced with a sudden medical crisis. To meet the expenses, they were forced to liquidate long-term investments at a loss. This situation, he noted, could have been avoided if a basic financial cushion was in place.
According to Kaushik, the absence of an emergency fund can derail long-term wealth-building goals. Unexpected situations such as medical emergencies, job loss, or sudden expenses may require immediate funds, and dipping into investments meant for the future can undo years of effort.
What an emergency fund should look like
Kaushik recommends that every individual set aside at least six months’ worth of expenses as an emergency reserve. This amount should be kept easily accessible, preferably in a liquid fund or a fixed deposit. By ensuring liquidity, individuals can withdraw money when required without disturbing their long-term portfolio.
He described the emergency fund not just as a financial safeguard but also as a source of peace of mind. With such a safety net in place, investors can continue pursuing long-term goals without fear of setbacks caused by unforeseen circumstances.
Financial security as the first step to freedom
The CA emphasized that financial freedom does not begin with investments alone but with financial security. Establishing a robust emergency fund ensures that individuals are prepared for unexpected challenges and can stay committed to their long-term wealth-building journey.
By focusing on this foundation, Kaushik advised, people can prevent financial disruptions and move steadily toward achieving lasting financial independence.
Chartered Accountant Nitin Kaushik has underlined the importance of financial security as the first step toward financial freedom. In a recent post on X (formerly Twitter), he explained that individuals often focus on investments without creating a proper safety net, a mistake that can disrupt years of disciplined financial planning.
Before you invest, build an Emergency Fund !
— CA Nitin Kaushik (FCA) | LLB (@Finance_Bareek) October 3, 2025
I recently had a client who faced an unexpected medical emergency. While they were financially disciplined, they didn’t have an emergency fund in place. As a result, they had to sell their long-term investments at a loss to cover the…
The cost of skipping an emergency fund
Kaushik illustrated this point through a client’s experience. Despite being financially disciplined, the client had no emergency fund when faced with a sudden medical crisis. To meet the expenses, they were forced to liquidate long-term investments at a loss. This situation, he noted, could have been avoided if a basic financial cushion was in place.
According to Kaushik, the absence of an emergency fund can derail long-term wealth-building goals. Unexpected situations such as medical emergencies, job loss, or sudden expenses may require immediate funds, and dipping into investments meant for the future can undo years of effort.
What an emergency fund should look like
Kaushik recommends that every individual set aside at least six months’ worth of expenses as an emergency reserve. This amount should be kept easily accessible, preferably in a liquid fund or a fixed deposit. By ensuring liquidity, individuals can withdraw money when required without disturbing their long-term portfolio.
He described the emergency fund not just as a financial safeguard but also as a source of peace of mind. With such a safety net in place, investors can continue pursuing long-term goals without fear of setbacks caused by unforeseen circumstances.
Financial security as the first step to freedom
The CA emphasized that financial freedom does not begin with investments alone but with financial security. Establishing a robust emergency fund ensures that individuals are prepared for unexpected challenges and can stay committed to their long-term wealth-building journey.
By focusing on this foundation, Kaushik advised, people can prevent financial disruptions and move steadily toward achieving lasting financial independence.
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