So, you want to create an emergency fund. How do you do it? Here’s a shocker: it all starts with goals.
First, decide how much you want to save. If you’re like most people, you probably have little to no savings right now. If that is the case, it can be a little overwhelming to make your goal 3-6 months worth of living expenses. Heck, if you just started your budget, you might not even know what 3 months worth of living expenses amounts to!
A good initial goal is $500-$1000, which is (hopefully) enough to cover your car breaking down, or the need for some basic, but unexpected, home repairs, or perhaps even 1 month’s rent. Of course, if you are awesome and have that much saved already, your goal could be 3 months living expenses, or 6 months. . .you get the idea.
Once you know your goal, review your budget. You may need to free up some money from one of the other categories. This is where the percentage guides come in handy! If you see that you are spending outrageously in a particular category, consider cutting back a bit and putting some of that money toward your emergency fund. Even though you might have to make some short term sacrifices, trust me when I say it is worth it! When unexpected repair or medical bills come in the mail and you can pay them without stressin’, I don’t think you’ll have regrets. And don’t worry if you can only save small amounts from each paycheck. Even $10 a month gets you closer to your goal, and, more importantly, it gets you into the habit of saving!
Well, you have a goal, you allocated some funds in your budget. . .where do you put your money? More on that in “Emergency Fund How To, Part 2″!
