Friday, February 24, 2006

Emergency Fund

The rule of thumb in money management is to have at least three months' salary available in case of emergency. You know, an emergency like the furnace going out in winter, a flat tire or having an appliance suddenly die. The fact is at one time or another, we'll all have some kind of emergency that will call for us to tap our savings. "But what savings?" most of you are asking. That's what this edition is all about. But three months worth of salary? For most people this seems like a daunting task, especially if you have very little already in savings. So how do you get it?

Well first, you have to save it. One of the oldest tricks in personal-finance is to pay yourself first. This is a painfree way to save. The easiest way to achieve this is to have a set amount automatically deducted from your check each pay period. Get your last paystub and look at the net pay. Either take a percentage of this or a set dollar amount and have it transferred into your savings each pay period.

I know some of you are saying "Well yeah, but there's nothing left to save". That's why is so important to pay yourself first. Even if it's only $5 or $10 dollars per pay period. Have you ever heard the expression "Making mountains out of molehills"? Well, it doesn't have to only have a negative connotation. Turn those molehills into mountains of cash.

If cash is tight or you're living paycheck to paycheck this seems impossible. But it is possible. Each pay slip $1 or $2 dollars to the side. Do this faithfully every pay. Then, when you get your next raise increase that amount if only by another couple of bucks. Over time your reserve will be bursting at the seams.

I know it seems challenging but you can do it. Start of small if you have to, but do it! Don't be discouraged when by the small amounts that you may start with. Do this each pay, and before long those amounts won't be small anymore!

Just Save!

Till next time...

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