How much reserve money you really need right now?
How to Get Started
Yes, a minimum of six months of expenses is a lot to save. If funding an emergency account seems too daunting to you, begin by taking baby steps. Make a goal to accumulate $1,000, then $2,000, as quickly as you can. Try to steadily build up your reserves until you reach your goal. This might require some sacrifices to reduce spending, especially if you’re like most and are already cutting back.
If you’re not a disciplined saver, here’s a tip: put it on auto-pilot. If you receive a paycheck by direct deposit, ask your employer to split your payment between your regular checking and your emergency account. If you get a paper check or are self-employed, set up an automatic transfer from your checking into your emergency fund. This way you never see the money and don’t even have to think about it.
Where to Keep Emergency Money
Emergency funds should be easy to access, but not so easy that you’ll be tempted to spend them. It’s best to keep reserves completely separate from other accounts. In next week’s show, I’ll cover specific options for the best places to stash your cash. We’ll cover important issues to consider so you can keep your money safe and still working hard for you.
Get a Move On
An emergency fund is one of the most important financial “must-haves.” So there’s no time to spare in getting started. No one said financial security would be easy, but the goal is to be as prepared as possible to survive the tough times.
Are you looking for successful strategies to save and invest for a secure future, even during market volatility? Check out my new audiobook, Money Girl’s Guide to Retirement Planning. Find it on iTunes and Audible.com.
I’m glad you’re listening. Chi-Ching, that's all for now, courtesy of Money Girl, your guide to a richer life.