An emergency or rainy day fun is a key component is paying of your debt and becoming completely debt free. This fund will allow you to avoid using credit cards when cash gets tight. If you lose your job, the car breaks down, or have unexpected medical expenses, an emergency fund will help alleviate some of the financial burden.
Instructions
1. Determine how much you can set back out of each paycheck to begin a small emergency fund. Depending on your needs and expenses, a starter fund can be as little as $500 to $1000. It should be enough to get you through about 1 month of expenses. The starter fund will help you out until you get a more steady financial outlook.
2. Remove a portion of money from each paycheck and place it into a savings account. This savings account should be separate from any other accounts and should not have a debit card attached. If you need the money you can withdraw it from the branch location. This will keep you from spending your emergency fund on a new pair of shoes or the newest electronic gadget.
3. Set a Monthly budget. Setting a monthly budget will help keep your financial goals a reality. Any money that does not go toward paying off debt or paying monthly bills should be added to the emergency fund.
4. Build your emergency fund each month by adding more and more money. As you pay off your debt it will become easier to set aside this money. Your fund should have at least 3-6 months worth of expenses saved.
