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Building an Emergency Fund

Adequate Emergency Funds take time to build.  Get started by putting aside two weeks pay in savings. Budget at least $50 per month to your Emergency Fund.

Conventional wisdom says your Emergency Fund should equal 3-6 months of living expenses.  But one year + feels right to some.  You are the best person to determine the amount for your family

As a rule of thumb, this fund should be larger:

  • The more conservative you are 
  • The less job security you have
  • The less steady your family's income is--you earn commission or tips or otherwise have an irregular income stream
  • If self-employed
  • If you rely on one income to support your family
  • Anticipate a career change or other significant transition
  • As you approach retirement

The correct amount is that which gets you through whatever life throws at youRemember, these monies will be spent and must be replenished

 

NOTE: Without this fund you will be forced to use high interest credit cards, borrow from family or friends or deplete retirement assets when an emergency arises.

<NEXT:  Where to stash your cash?>

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