Have you ever heard of Murphy’s Law?
Murphy was a very wise man who lived many years ago. His law states, “Anything that can go wrong will go wrong.” For that reason we have to make sure that we are prepared for when shit hits the fan. And trust me, especially when it comes to money, shit will hit the fan.
This is why it is so important that you have an Emergency Fund. An Emergency Fund will cover you if any unexpected necessities need to be replaced or show up. For example, you car breakdowns, you lose your job, you fall ill, you need to replace your washer or dryer or repair the roof of your house.
Your Emergency Fund is not meant to pay for shopping sprees, birthday presents, vacations, outings etc. It is meant for TRUE emergencies.
Having an emergency fund will help keep you out of debt because now that you have the cash to cover such emergencies, you don’t have to rely on your credit cards to cover those expenses.
So how much should you save exactly towards your Emergency Fund? Financial experts recommend that when you are first starting out, you have $500-$1000 in your Emergency Fund. As you pay off debt that number will increase to 3-6 months of living expenses.
I know it can seem daunting right now to save $500-$1000 when you have all this debt to pay. But financial experts also recommend that you hold off on paying debts (anything over the minimum balance due) until you have your emergency fund, funded. Again, this is to avoid you having to go further into debt if such an emergency should arise.
The quickest ways to fund your emergency fund is to pick up extra hours at work or a temporary part time job. Now is the perfect time with the holidays coming around. A lot of stores are looking for extra holiday help. You can also sell things on craigslist or host a garage sale.
The key really is to just fund that emergency fund as quickly as possible. So that you can begin tackling your debts. A topic that we will cover next week.
Before you go, I want to know. Do you have an Emergency Fund already? If not, how do you plan on funding it? Leave me a comment below!