Most of us know we should have an emergency fund for those rainy days. For many, though, thunderstorms have been looming. If you’ve tapped your emergency fund or really never had one (other than that ‘Emergency Fund’ called your parents), here are some suggestions to get you back on track.
How much? They (whoever ‘they’ are) suggest that you should have three to six months of living expenses in your emergency fund. To determine your monthly living expenses, look at what you absolutely have to spend each month to meet your obligations and to continue to live. No, your $4 coffees are not a requirement to survive, but the rent for your apartment and your student loan payments are.
Is that possible? At some points in your life, getting to that level can seem like you have a mountain to climb. But, keep in mind, that, in addition to having a stash of cash to fall back on in case of an unexpected expense (car repair) or the loss of your job, having an emergency fund can really be about a state of mind. You need to believe.
So, I believe. How do I start? Set up a separate account - probably a savings account - at your local bank or credit union. These days, you probably won’t be able to earn much interest on it, but every penny helps. Then, figure out how much you can afford to contribute every pay period and do it. You can use this Simple Savings Calculator to see where you can save money.
Set a goal. Once you have figured out how much you can save each paycheck do it. The easiest way is to direct those funds from your paycheck to that particular savings account (most employers let you direct deposit you earnings in more than one account). If you don’t ever touch the money, you have a better shot of it acutally getting to your savings account.
Find a bonus. Play games with yourself to find extra money. For example, each month, collect your loose change in a jar. At the end of the month, see how much you have saved and deposit it directly into your emergency fund. Or, each time you save money, maybe you packed a lunch instead of eating out, take that money out of your wallet and put it away to deposit in your account.
If you do these things, you will quickly get over the mountain and breathe a little easier knowing you have a cushion for the unforseeable.
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