Emergency Fund Piggy Bank, Photo by Gelayne Blyden
According to a report released by The Consumer Federation of America and The Certified Financial Planners Board of Standards, Inc. 38% of households live paycheck to paycheck. This means if you don’t get paid once, you’re in serious trouble.
You need an emergency fund. An emergency fund is exactly what it sounds like, an account that is funded for the purpose of emergencies. An emergency fund has 3-6 months worth of expenses in a liquid, or easily accessible account.
Dave Ramsey went bankrupt at age 30, four years prior he had a $4 million real estate portfolio. Since then Ramsey has used Biblical principles to build wealth and get out of debt, his course Financial Peace University, FPU teaches others to do the same. Baby Step One at FPU is building a baby emergency fund of $1,000 if you make more than $20,000 annually or $500 if you make below $20,000 annually. Saving has to become a priority.
Consumer Cards, Photo by Gelayne Blyden
The thing about life is emergencies happen, so expect them.You may be thinking I can’t afford an emergency fund. But can you really afford not to have one? You and your family’s welfare are important, and the emergency fund is there so that you can get things done when facing the unexpected or crisis. For example, what if you lose your job and your severance pay is not enough to even pay your rent. With an emergency fund you’ll be able to meet your obligations while looking for another job.
Money Tree,
Photo by Gelayne Blyden
See an emergency fund as an investment in your security, not an extra financial burden. Think of what would have happened if you had cash when you faced a bind? A good piece of advice is to actually define what an emergency is. This will help you decide what you can and cannot spend the money on in the future. If you’re married, you and your spouse should be on the same page. If you’re single, maybe you could try getting an accountability partner to keep you on track.
