Monday, February 1, 2010

Be Prepared - Have an Emergency Fund

An important step to being financially secure is having an emergency fund in place. Unexpected expenses will happen. Being prepared for these challenges can make them feel not quite so catastrophic.

In the last couple weeks we have unexpectedly had to purchase...

a new hot water heater to the tune of $462.16
medicine for myself and son $568.32
a root canal $485 (oh and this is just the beginning)

Thankfully we have an emergency fund for times like this. I am also glad I just finished my pantry challenge so I had a little extra money left over that went towards some of these expenses.

Don't have an emergency fund? You can start right now. Here are a few tips to help.

1. Separate your emergency fund money from the rest of your money. Having it all together could tempt you to spend it. Place it in a separate account or even in a separate bank like an online bank.

2. Build up your balance. You will hear many different opinions on how much you should have in your emergency fund. For us, we follow Dave Ramsys advise and we keep $1000 in our fund. Once you have this saved you should start saving 3-6 months of living expenses.

3. Understand the purpose of the emergency fund. It is not there to buy a new big screen TV or a new pair of shoes. The money is to only be used for emergency's.

4.. Make sure if you use it, you replace it. Don't get discouraged if you do have an emergency and you end up having to use part or all of your emergency fund. That is why you have it. Just make sure you save that money back up. This way it is there when the next disaster strikes.

1 comment:

  1. Yes we have one, but we haven't had to dip into it in a very long time. Somehow we have either saved ahead of time, or rearranged the budget to cover things and that is a nice feeling. An EF is essential to peace of mind.