Am I Saving Enough Money for Emergencies?

People struggling in this tough economy may ask themselves, "Am I saving enough money for emergencies?" If you are unsure, or feel that you have no extra money to put in savings in case anything goes wrong, reevaluate your personal finances and tweak your budget to include more rainy day money.

Am I Saving Enough Money for Emergencies?

The problem with emergencies is that you have no way of knowing how much they are going to cost before they happen. You cannot plan for an emergency that will only cost one hundred dollars. While some emergencies, such as a flat tire or an impossible stain on your coat, may only cost you around that amount, most serious emergencies are more expensive.

Many emergencies, such as serious health problems or house fires, can cost more money than you make in a year. Of course, it is impossible to know, "am I saving enough money for emergencies?" When you are talking about things like cancer treatment or complete refurbishing and repurchasing of all household goods

Planning for the absolute worst contingency is not always practical. If you make a modest amount of money in a year, it does not make sense and can actually be close to impossible, to put away tens of thousands of dollars just in case of an emergency.

How much should you save for emergencies?

A general rule of thumb is to save 3 to 6 months worth of living expenses. This amount is most important in case of job layoff or illness. When you have this amount of money put aside, you can use it as well for incidental emergencies such as plumbing problems or car repairs. The money you take out for these things should be repaid to the account as quickly as possible.

Asking yourself, "Am I saving enough money for emergencies?" Becomes more important if there are things in your life more prone to breaking down or becoming in need of help. For example, if your car is 12 years old and has 180,000 miles on it you should put aside more money for car repair emergencies. Ideally, you should also be saving money for a new car. This can be the same account. If you have an existing disease or disorder, and are under insured or do not have medical insurance, you should make sure to put aside more money for medical emergencies.

Saving enough money for any unforeseen event that may crop up is important though sometimes impossible. By their very nature, emergencies are unpredictable and extreme. Putting aside a certain amount of money per week or per paycheck to an emergency fund can give you peace of mind and make it less likely that an emergency will ruin other parts of your financial life.