Monday, May 6, 2013

Budget View- Part 3- The Emergency Fund

Even if you are on a limited budget and only have a few pennies left over when all the bills are paid for the month, you can still create an Emergency Fund so you do not have to rely on credit or go into debt when an emergency presents itself.

Remember that the point of this Budget View series is to help anyone who wants it. These are the things that work for my household. It may or may not work for yours. Take what may apply and work for your family and leave the rest.

Dave Ramsey is a well known finance coach, and has authored a great book called:

Lots of great advice on how to get out of and stay out of debt.
I read this book a couple years back when I checked it out at my local library. It really changed the way I looked at our financial situation and how to really take control of it. If you have the time I highly suggest finding a copy and reading it. You may find something to implement that will help you and your family find financial peace.

One of the steps from Dave's book that I immediately implemented was his Baby Step 1- finding a way to get $1000 into an emergency fund. 

About 4 years ago we decided to not have a major credit card any longer. We never let our credit card debt get away from us BUT we were at the point in our lives where paying that payment every month and never seeing the balance budge was just a bad reminder of money mistakes we made over the past few years. When we got our tax refund that year we paid off the entire balance and cut up the card for good! 

Building the $1000 emergency fund was not necessarily a quick process but we tried to build ours up as quick as we could in case something unforeseen popped up and we needed access to quick money.
It really is not a matter of IF  an emergency situation will happen it is a matter of WHEN  it will happen.

Having an emergency fund will soften the blow a little bit when things like unexpected job loss, a medical emergency, or home & car repairs happen.
This way you will not be creating any new debt by taking out a loan or using a credit card. 
If you are in debt you will have a feeling of security with an emergency fund in place because you know you will not be adding to the debt you are working so hard at paying off.

The best way to begin is by opening up a savings account and have it taken out of your pay check automatically. This will give you pretty quick access to your money when that emergency does arise.
If you feel like you are not much the saving type, start small. 
Let's be honest we don't miss the $5 we spend at the local coffee shop a time or two a week for our morning pick-me-up, do we?. $10 a week or $20 bi-weekly adds up faster than you think and you hardly notice the difference in your pay!

Remember building an Emergency Fund is a great way to break the cycle of debt. It also gives you a better chance at having a budget that really works for your household and brings you the peace of mind you deserve.

Enjoy the View~

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