Start with $1,000 and build up to $1,500 in your emergency account. Keep this money separate and don’t touch it unless you have an emergency. If you put these funds in your primary account, they will get spent. Keep them separate. Once you are debt free, you should increase your emergency fund balance to 4-6 months of expenses, but for now start with $1,000.
- What is an emergency? Car repairs, unexpected medical bills, funds to hold you over if you lose your job or have a shortage in your paycheck, an unexpected home repair like a broken hot water tank that needs replacing asap, travel for a funeral or medical emergency.
- What is NOT an emergency? A new outfit, a vacation, regular on-going bills or maintenance, Christmas, Birthdays, eating out, cable TV, a new or replacement phone. You get the picture!
How can you get money for an emergency account? Work extra hours, cut back on eating out, use your tax refund, take on a part-time job, sell some stuff, start a side hustle, save all your change and transfer once a month to the emergency account, have a set amount transferred automatically from your primary account each month.
What happens when you have an emergency and need to use these funds? These funds are for an emergency, so use them. If your car breaks down, pull out only the funds you need for the repair, then as quick as possible build your emergency account back to $1,000.00. Don’t rely on your credit cards for emergencies, use the emergency account and then replace the funds as soon as you can.
Until next month!