Whether you are new college graduate starting life or a married couple in your 40s , there’s one thing for sure: We all need an emergency fund.even if we have debt
I know it can be difficult to build this if you are living on student loans for new college graduate (or paying them back in large sums every month.) or dealing with all of the kids expenses and having credit card debt. However, having an emergency fund in place is the best way to ensure financial freedom down the road.
The average recommended amount for a starter emergency fund is $2,000. This is what many financial experts say is the amount of “unexpected” expenses that people incur every year. I also recommend $2k even if you have some credit card debit. My favorite guru Dave Ramsey has recommended $1000 if you have credit card debt, but life doesn't seem to hit for under $1k emergencies anymore This could be your car breaking down, a a sudden illness a root canal, or a large home repair. The purpose of the fund is that you don’t have to put these expenses on a credit card or let them affect your everyday life.
You may think that is it s nice idea but that is a HUGE chunk of chain for you and you might not have extra money to build an emergency fund.
However, if you build up an emergency fund slowly and steadily, you can reach your goal in a shortly without having it hurt too much. Here are some ideas on how to do that.
Pretty soon, you’re going to hear a lot of talk about spring cleaning. Make this your year. Be rigorous about what you want to give away. Have a big garage sale and put a great amount of effort into pricing your items competitively and in an organized fashion. People love organized garage sales. It makes them feel like they are buying items that were well taken care of. Or maybe hit craigslist- do you have any extra furniture, gadgets,. Just look in your closet . Any old text books. So, take a look around your home. What can you sell?
Cut Out An Unnecessary Expense
I’m not saying to cut out an unnecessary expense forever, just long enough to build up an emergency fund. For example, give you up a $100 a month cable bill would merit you a $1,200 emergency fund at the end of the year. Giving up your $100/month iphone would do the same and you can start using a prepaid cell phone. . You could also cancel your $60/month gym membership to get a $720 emergency fund by the end of the year. Exercise at home or maybe taking up running. Take a look at what you spend every month to see what you can easily and painlessly cut out.
The easiest way to build an emergency fund is to set up automatic withdrawals in a separate account also known as pay yourself first. On each pay day, set up a withdrawal to go into the emergency savings account.
It only takes a tiny bit of effort to reap big rewards when it comes to setting up an emergency fund. Start today! I promise you won’t regret it.