Right now, we are going through the loss of some income in our house and I’m so thankful that we have a small emergency fund to rely on. It won’t last long – but it will likely get us through a little period here until we can get another income stream going.
I started my first emergency fund when I began digging myself out of $40k worth of debt ($20k of that in credit cards alone). The simple rule that I followed at the time was from the often quoted Total Money Makeover book by Dave Ramsey of $1k. This is just to get you started and is by no means the final savings you should keep at the ready. But it will get you going and will offset any interruptions you have as you dig yourself out of debt. That $1k emergency fund has saved me on more than one occasion.
I know that many of us are at differing income levels. And, saving up $1k to one person is like a weeks worth of work, while another person it may take a month or more. And, so realize that the $1k rule is just something to aim at. It is not the be all number that works for everyone. Obviously, if you have ten kids and 5 of them are driving, you may want to look at saving more than that. Likewise, if you are single and still living with your parents or have share rent with roommate, $500 might be a good goal.
We just suggest that you have a decent amount in savings as you begin your journey to financial freedom.
In the end, the goal will be to have at least 3-6 months of savings at your disposal. But, this can come down the road – typically after you have gotten rid of most of your debt.
Allow me to leave you with some encouragement and tips to get that emergency savings going or completed.
- You can get $1k in savings in just 4 months by saving $250 a month.
- Or, $100 put away each week – and you can get the $1k in 10 weeks (2.5 months).
- Sign up for automatic savings with your bank or through an online service. I am currently using SmartyPig and ImpulseSave to automate my savings.
- Offer to do some side jobs for extra money. Or, ask the boss for a raise. Now is a good time.
- Make a call to your phone company, cable company or cut out a few non-necessities. Pocket the difference saved into your emergency account.
Hope this helps – and that you are continuing to scratch off those challenges! (You can still sign-up for a chance at winning $100 by completing the 10 challenges this year!)