Do you have an Emergency Fund?
From losing your job, to car/home repairs, to accidents, to illness and disability, an Emergency Fund is the best way to cover your butt in case of life’s problems.
How to start an Emergency Fund:
- Decide how much you need. You should save 3-6 months of “Essential Expenses”. What are your “Essential Expenses”? Rent/Mortgage payment, Food, Car Payment, Minimum Debt Payment, etc Anything that you’d get into serious trouble if you didn’t pay. You may have cancel non-essential services (cell phone, cable, etc) until your back up on your feet.
- Start Saving! Even $25 per pay check can go along way. Make the debit automatic from your bank account into a High Interest savings account. Don’t put into GICs or anything else where you won’t have good access to the money. But, don’t put the money somewhere where it’s too easy to access it, that will give you the temptation to spend it on non-emergencies.
- Once you’ve reached your 3-6 month goal, you can stop the automatic payment if you like. But, when you’ve paid something out of the emergency savings, you should try and put that money back as soon as you are able.
Having an emergency account is an essential part of any Financial Plan. Start yours today!
Tags: emergency, emergency fund, financial planning, fund, savings
August 7th, 2009 at 8:41 am
I had my emergency fund built up to a little more then $1000, I then used that money to pounce on my credit card. I have about a month to go before my C/C is paid off, and then I will aggressively put that money back towards me E-fund.
I would like to have about $3000 saved which I hope to have done by the end of next year.
August 7th, 2009 at 9:05 am
Its tough to decide to keep the emergency fund in place when you have debt – especially since the interest rates on saving accounts are paying a pittance. The only problem is that if you use an emergency fund to pay off debt, if there is an emergency you have to use your credit to pay for it since your emergency fund is depleted.
I know you know this, but I thought I’d add it for the benefit of others. That’s great that you’ll have the c/c paid off and will get your emergency fund back soon! Awesome!!!