Having emergency money that is easily accessible in an event such as a lay off or medical situation where you will not be able to work for awhile is important so that you and your family don’t suffer unduly while you are waiting to get back on your financial feet. Everyone should have an emergency fund that has from three to six months worth of your living expenses available should anything unforeseen happen to the main breadwinner.
Setting up an Emergency Fund – Getting Started
Many financial experts will tell you that investing in stellar stocks is the way to get the money you need for an emergency fund. Before you even think of getting into the investment game, you need to have a small emergency fund already in effect. Laying the groundwork for financial security is more important than investing in no-load mutual funds and stocks. Once you have a bit of money squirreled away, then it is time to look into where and how your money will best grow for your emergency fund.
Though your family emergency fund should hold three to six months worth of daily expenses, before investing have at least $1000 to $1500 set aside. If you are expecting a bonus or an IRA is coming to fruition, you will feel safer investing that money knowing you have a bit of a cushion in the bank first.
Pay into your emergency fund each week. Treat it like a bill that must be paid. Set an amount and stick with it. If some weeks you can put in more, all well and good, and if some weeks you must put in less, try and make it up the next time. As long as you consistently add to your emergency fund, before you know it you will have racked up quite a bit of change.
Your Credit Card Debt
The most important thing when planning for that rainy day is to get rid of your credit card debt. There are a number of ways in which you can do this. You utilize a debt consolidation firm or you can begin to do it on your own. Take all your credit cards and write down each of the balances along with the amount on each card. Choose the card with the highest interest rate and pay that down first. Once you have cleared that card, move on to the next highest interest rate. It is more important to pay the higher interest cards than it is the higher balances as this will save you money in the long run.
Keep Track of Your Spending Habits
Tracking how you spend your money over a few months time can help you to eliminate spending that is really unnecessary. You can use a program or calculator you find on the internet or you can ask your bank for help doing this. When you look at the overall spending habits of your family, you can cut out unnecessary purchases, fees and other means by which you are losing money needlessly.
Planning for an emergency should be the top priority of those people that have big assets such as a home and especially for those with a family. The options you have in an emergency will depend on how much emergency fund you have available. Having a nest egg to fall back on in hard times will ease the financial burden until you can get yourself firmly on your feet once again.