Key Steps to Building an Emergency Fund
Now that US banks are some line of credit holders from accessing their saved cash, the idea of building up an emergency cash fund has become important to even more people. If you haven’t got an emergency fund, or it’s not enough to last you six to twelve months, then try following these steps to ensure your financial safety in an emergency:
- Calculate your monthly expenses - check for at least the last three months, and don’t be unrealistic about cutting back on extra spending.
- Multiply your monthly expenses by at least six to calculate how much your emergency fund should be. If your job is uncertain or based on commissions, for example, you should save for twelve months instead.
- Choose a safe place to keep it, usually from bank money-market accounts, high-yield savings accounts or money-market mutual funds.
- Divert money from retirement savings and extra repayments on low rate loans until you have built up your emergency fund to the level it should be.
- Check each year whether your circumstances have changed enough to need a bigger emergency fund and if so, save accordingly.
By following these steps, the chances are good that even if your family experiences a financial setback like losing a job or having sudden high repair bills to pay, there won’t be a big drama.
This entry was posted on Monday, September 29th, 2008 at 5:53 am and is filed under Budgets & Money Management. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
