The Rules Of An Emergency Fund
Posted by Takara Alexis at 2/2/2011 10:51 AM 
Categories: Anything but collections, SEO Tips, Budgeting, Debt Collection, Happy Debtors
Categories: Anything but collections, SEO Tips, Budgeting, Debt Collection, Happy Debtors
The Rules Of An Emergency Fund
by Takara Alexis
Set yourself a goal. I've always said that every family should have a cash cushion of at least three months' worth of expenses. In other words, estimate how much you spend each month on essentials, multiply it by three, and that's what you want for emergency savings. If you typically spend $3,000 a month, your goal is to have at least $9,000 put away in a reserve account not to be taken out or spent unless there's an emergency.
Should you try to save more? Absolutely. How much more depends on what you feel you'll should have to be able to "sleep well at night." I know people who keep two years' worth of expenses in a special account. Anything more than that could be excessive, but better too much than not enough.
Every single time your paycheck is deposited, your checking account is set up to automatically sweep money into a separate savings account you've set up for your rainy-day fund. I suggest you begin by putting 5 percent of each paycheck to your emergency account until you reach the goal you set for yourself.
Once you have made the commitment to funding a rainy-day account, the next decision you have to make is where to park it. I used to emphasize the importance of locating a place that would give you a reasonable return on your money. But these days, with interest rates at rock-bottom levels and the stability of many financial institutions still in question, I worry more about security.
The reason most people don't have any emergency money in the bank is that they have what they think is an emergency every month. What's a real emergency? It's not just having to purchase a new outfit for that special event. Or finding an amazing set of wheels for your car at a once-in-a-lifetime price. Or deciding you have got to buy a new dishwasher because the old one is making noise.
A true emergency is something that threatens your survival, not just your desire to be comfortable. So unless your family is about to go hungry or be thrown out into the street, you shouldn't be going into your emergency fund.
by Takara Alexis
Set yourself a goal. I've always said that every family should have a cash cushion of at least three months' worth of expenses. In other words, estimate how much you spend each month on essentials, multiply it by three, and that's what you want for emergency savings. If you typically spend $3,000 a month, your goal is to have at least $9,000 put away in a reserve account not to be taken out or spent unless there's an emergency.
Should you try to save more? Absolutely. How much more depends on what you feel you'll should have to be able to "sleep well at night." I know people who keep two years' worth of expenses in a special account. Anything more than that could be excessive, but better too much than not enough.
Every single time your paycheck is deposited, your checking account is set up to automatically sweep money into a separate savings account you've set up for your rainy-day fund. I suggest you begin by putting 5 percent of each paycheck to your emergency account until you reach the goal you set for yourself.
Once you have made the commitment to funding a rainy-day account, the next decision you have to make is where to park it. I used to emphasize the importance of locating a place that would give you a reasonable return on your money. But these days, with interest rates at rock-bottom levels and the stability of many financial institutions still in question, I worry more about security.
The reason most people don't have any emergency money in the bank is that they have what they think is an emergency every month. What's a real emergency? It's not just having to purchase a new outfit for that special event. Or finding an amazing set of wheels for your car at a once-in-a-lifetime price. Or deciding you have got to buy a new dishwasher because the old one is making noise.
A true emergency is something that threatens your survival, not just your desire to be comfortable. So unless your family is about to go hungry or be thrown out into the street, you shouldn't be going into your emergency fund.
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