The early years of my family were a constant struggle to make ends meet.
It wasn’t long before we were in debt and stressed out. Whenever unexpected expenses came up, we used credit cards to get by, pushing us further into debt.
An emergency fund could have helped.
Here’s Why:
- An Emergency Fund can keep you out of debt (or keep you from adding more debt) when faced with unexpected expenses, such as car repairs, broken appliances, or medical bills.
- An Emergency Fund gives you options: Take advantage of a cash discount. Use credit now and pay when the bill comes. Or negotiate a payment plan.
- An Emergency Fund provides peace of mind: knowing you have a cushion to absorb unexpected expenses eliminates fear and anxiety, allowing you to focus on other things.
Experts recommend having a minimum of 3-months of living expenses in an emergency fund. That may seem like a lot if you’re just starting out, but even small amounts can make a difference, and they can add up fast over time.
Start Simple
If you’re starting small – $25, $50, or $100/month, think in terms of the potential emergencies you could cover after each month. For example:
What potential expense could you cover after one month? What expense could you cover with 2x that after the second month? After 5 months?
By thinking in terms of real potential benefits, you’ll see the value of your growing stash and be motivated to continue saving. It may even be fun to watch it grow!
It’s a great feeling when you’ve finally saved enough to cover several months – or a full year – of all your living expenses. Peace of mind is knowing that if the car breaks down, or the cat gets sick, or you lose your job, you’ll be able to survive.
You can do it!