Emergencies happen. We like to imagine they won t happen to us, but we know they do. And often we need a little extra cash to get through those tough times. But where do we find that cash? It s easy to turn to a credit card or borrow from a friend, but the most secure method, one that keeps you debt free and self-sufficient, is to have an Emergency Fund.
An Emergency Fund is money you have set aside and don t touch until a true emergency arises.
So how do you start one of these funds?
1. Open a savings account that s easy enough to access in an emergency, but not so easy that you ll be tempted to tap into the fund for non-essentials.
2. Choose an ideal amount of money for your completed Emergency Fund. Most people choose a number that covers 3 12 months of expenses.
3. Start small and work your way up to your ideal fund. Even if you can only set aside $100 when you open your Emergency Fund, that s great because you re on the path to financial security.
4. Pay into your Emergency Fund every month. Treat it like a bill and don t skip payments.
Over time, you ll reach your Emergency Fund goal. At the outset, setting aside a year s worth of expenses may seem like an impossible goal. But even if it takes you a few years to reach this goal, you re taking on the path to financial independence and that s something to be proud of.
