Saturday, January 22, 2011

Emergency Fund

We learn from the Bible story of Joseph in Egypt that seven years of plenty are followed by seven years of famine.  My husband likes to remind me of this which is his way of saying, "During our times of prosperity we need to be thinking ahead and preparing for what may come."  The best way to prepare financially is to save a little each month in an "Emergency Fund."  Financial experts suggest having at least 3 months' of expenses set aside, but if you only have one income in your household or are working in a more risky area for job loss, you really need to try and set aside 6 months-1 year.

I know this seems like an impossible task.  But I know it is possible because we have done it and I am aware of other families who have done it as well.  The amount for each family is different.  You really need to determine what your bare minimum expenses would be for one month.  Notice that I didn't say to pay attention to what your income is each month.  If you can figure out a way to reduce your expenses, the amount you need in an emergency fund can be less.

For example, if you are living on $3,000 a month right now, you would need to save $18,000 to cover 6 months'  worth of expenses.  If you are able to find ways to cut back to only $2,500 a month, you would only need to save $15,000.  You would also have an additional $500 a month you could put toward your emergency fund instead of other purchases.

Great peace of mind comes as you watch that emergency fund grow.  Get creative in finding ways to save money.  Many of us make resolutions to do better with our finances in a new year.  Over the next few weeks, I will be posting some ideas that we have come up with that help us save money every month.  Hopefully, these ideas can help inspire you to keep at it and get that emergency fund filled up.

No comments:

Post a Comment