Why Do You Need an Emergency Fund

Emergency funds help out in times of need. When you loose your job, become disabled or have unexpected medical bills, emergency funds come in handy. These funds act as a safety net. Emergency funds being available can help us to have money for food, housing and clothing for up to 6 months, if saved the right way.

Emergency fund money should be treated like another bill. Take the money for the emergency fund out of your paycheck, before putting any money in your checking or savings account. This should be a seperate account by itself. You need to start out by having 3 months of cash reserve. Then, after you have 3 months cash reserve you can work on having a 6 months cash reserve. If things are going well, then you may want to check on setting up a two or three month CD. If you see your fund growing, then you may want to consider a short-term governmental bond. This would help you to have a year or two year emergency fund available.

What is the secret to saving money? Take the Emergency fund money out first. Figure out where your money is going, if you want to save money. Keep a record of what you are spending your money on for 1 month. Never dip into a retirement account. Whenever saving money becomes an emotional priority to you, you will learn to put back emergency money first. Imagine that you child has to have sugery in the next few weeks. You would work extra hours, if you had to, to see that your child had the surgery. Give God his 10 percent and yourself your 10 percent. Then what is left can go into your checking account. We set wrong goals for ourselves by going into debt for things that we want. It may not be things that we need but, we want it anyway. Get focused in your thinking and learn to make good personal decisions. Until you learn to take some out of your paycheck for yourself, you will never have an Emergency fund.