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How Do You Know if You Need an Emergency Fund?

Unless you are independently wealthy, you need an emergency fund.  An emergency fund reduces your vulnerability to sudden life changing events.  Stashing away money to offset a job loss, unforeseen major home or auto repairs or medical complications just makes good sense.

A job loss or any major expense could force you to use your credit cards more, likely maxing them out, and put you into debt that could easily lead to bankruptcy if things don’t to improve.

So, deep down in that part of your where common sense lives, you know that you need money in reserve for those “rainy days”, but just how much do you really need?  More importantly than that, how do you fit building your emergency fund into your current budget?  Let’s take a look at how to go about building your emergency fund:

  1. How big should your emergency fund be? So just how much money should you have in your emergency fund?  3 months of living expenses?  Six months? A year’s worth? …Yes!  Start out with 3 months if a year’s worth of expenses sounds like too much to wrap your head around right now.  Heck, if 3 months seems unobtainable, shoot for 1000 bucks.
  2. How do you fund your emergency account? The trick is to divide the amount you want to stash away by how many weeks (or pay periods) you think it will take you.  Let’s say your monthly living expenses are $2000, divide that by 12 weeks (that’s 3 months give or take), so that works out to be around $167.  If you could put aside that $167 each week, you have a month’s worth of living expenses in about 3 months.  Think about how awesome you will feel to know that you have that money stashed away in case an emergency popped up.  If you stuck with it, you could have 4 months’ worth of saving in a year!
  3. Open a separate account for your emergency fund.  Be sure to keep your emergency fund separate from your checking or regular savings account.  This will reduce the temptation to dip into your emergency fund when you really shouldn’t.  If possible, set an automatic withdrawal from your paycheck to go directly into your emergency fund account.  This puts your saving efforts on auto-pilot and makes it much easier for you.
  4. Start Now.  There is no better time to start your emergency fund than right now!  Put aside your pre-determined amount each week until you have reached your goal.  If you set a small goal at first, once you reach it, bump up the amount and shoot for a higher amount.  At this point, you have done it once, doing it again will be a piece of cake!
  5. Faster, Faster!  Look for any opportunity to build your emergency fund faster.  If you get some unexpected money, like your tax return or a bonus, put it (or at least most of it) into your emergency fund.  If you get a raise at work, put the extra into your emergency fund… By doing this, you could shave months off of the time it would normally take to reach your goal.


So, what if you can barely pay your bills each month, how in the world are you supposed to save anything?


Well, even setting a goal of a small amount like $500 is worth trying to achieve… don’t give into that feeling of being overwhelmed, surely you can sit aside something each time you get paid… you have to start somewhere.  If however, you find yourself in the situation where you have more debt than income… it’s time to see a professional and get some help.

The professionals at DebtHelper.com can explain the benefits of a debt management program and provide you with a fresh start.

One of the biggest long-term benefits of the debt management plan is the reduction in interest. Reduced interest allows you to pay off your principal balances faster while saving you possibly thousands of dollars in finance charges.

In order to determine if you are eligible for a debt management program, you can fill out an online budget application form now and then you can contact one of their Certified Personal Finance Counselors© at (800) 920-2262.

DebtHelper.com can currently accept clients from the states listed here. DebtHelper.com is licensed, insured and complies with all state licensing requirements to ensure mandated regulations are followed. They are diligently working on becoming licensed in every state and are opening new states monthly.

Please call (800) 920-2262 if you have any questions. DebtHelper.com’s consultations are free, call them any time.


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