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Everyone Needs an Emergency Fund



Emergencies happen. There's going to be a point in your life when you're going to need money asap. Maybe your car battery dies. Maybe the washing machine quits working. Maybe you got a new job but don’t get paid for two weeks. Maybe you had a death in the family and need to book a flight right away. Life is unpredictable and things happen. That is why an emergency fund is so important.

Sure, you can use a credit card for just about anything nowadays but who wants to do that? If you have to use a credit card for emergencies, then it's highly likely that you carry a credit card balance already. If that is the case, then you're paying interest every month on your balance. Hopefully, you're paying more than the minimum payment and have a plan to pay off the card(s). Either way, an emergency fund keeps you from having to use that credit card. An emergency fund makes unexpected expenses a heck of a lot less stressful. That's why a $1000 "starter" emergency fund is Dave Ramsey's first step in his tried and true method of managing your money.

A basic $1000 emergency fund should be part of your budget if you don't already have an emergency fund. You can find ways to set aside a small amount of cash each time you get paid until you reach $1000. You could also sell some items, hold a yard sale, or even get a second job temporarily if that's what it takes to get the $1000 saved up. Once you have it, keep it somewhere you can get to it easily and quickly. Some people like to keep it in cash somewhere safe in their homes. Others like to earn a little interest and keep it in a savings account at their local bank. Whatever you are comfortable with will work. Remember - it's for emergencies only and should not be used for anything else!

Start with a simple $1000 emergency fund. Once you have that saved up, you can go ahead and focus on tackling any other debts you have such as credit card debt or maybe a car loan. Once you have your debt under control, it's smart to boost your emergency fund to 3 - 6 months of living expenses. Notice I didn't say 3 - 6 months of your income. Living expenses are what you and your family need each month to stay in your home and be clothed and fed. This bigger emergency fund will save you if you ever lose your job or get hurt and have to miss work for an extended period of time.

I hope all of my frugal readers have an emergency fund. If you don't, start making a plan today to save up for one even if it's just $10 you put aside right now in an envelope. With persistence and determination, that $10 will be $1000 in just a few months. I promise you, you'll sleep better at night knowing that an emergency won't derail your financial goals.

Do you have an emergency fund? Email me at frugalteacherlife@gmail.com and let me know. I love hearing from my frugal readers!




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