Emergency Fund

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Emergency funds, rainy day funds, keep from using credit card funds, whatever you choose to call them, please create one.

The experts tell us we need 3-6 months of monthly income to create a cushion to carry us through financial challenges such as illness, loss of a job, unexpected expenses such as a car repair or something needing to be fixed in our homes.  You know the feeling, you lose the key to your car and $300 later the locksmith has you all fixed up.  Keys today are no longer a $3 cost for duplicating them at the local hardware store.  Things happen and they cost money.

Do most people have that 3-6 months cushion?  Not usually.  Do you think about the perfect 3-6 months cushion and just put off starting to save simply because it overwhelms you?  That is pretty typical.  In our consumer society we are constantly marketed to about buy, buy, buy, and then buy again.  The encouragement to save is pretty non-existent.  Spending is good for the companies who sell us stuff. Credit card usage is good for the banks who issue them.  These are the folks who spend big marketing dollars to get us to buy.  Is there a lot of marketing about saving money?  Not that I see.

The solution; just start small.  Take an envelope and start putting $20 bills in it and commit not to spending them.  When you get $100 accumulated, convert it to a $100 bill.  It will be just a little more difficult to spend at the local convenience store and if you grab that $100 bill for day-to-day stuff, you have to consciously decide to spend your emergency funds.  When you accumulate enough to meet account minimums to avoid a bunch of fees at the bank  ( or with an investment company), start an account.  The idea of this account is to accumulate money in a safe and secure manner, not to try and earn a bunch of interest or create an investment account.

Maybe you have the ability to save by payroll deduction.  This is different than investing through payroll deductions which go to a retirement account.  Also, some mutual fund companies allow smaller contributions to money market funds through automatic withdrawals from a checking account.  Be creative, look around and use the opportunities that you have to start small.   By staying consistent in your deposits as well as disciplined in not using the funds as they accumulate, you too can prepare for that emergency or rainy day.

Ask you financial advisor for help.  If you are your financial advisor, then you need to help yourself and just start.

This is not the time to study the situation, it is time to act. It’s easier than you think.

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