How To Set Up A Quick & Easily Emergency Fund

A simple little plan to start your financial journey

How to avoid a little mistake before setting up your emergency fund.

Setting up an emergency fund is really a simple process, but before you get started there is something you need to do first. And that is to make up your mind and be serious about it. Decide what this emergency fund is for. Every money account you have should have a purpose to do something.

What is the purpose of your emergency fund? Could it be a plan for your mortgage or rent payments/ a quick trip out of town due to a family emergency or an order for a town evacuation/ auto repairs or an unexpected relative shows up at your door unannounced, you get the picture.

Making up you mind and being serious will give you purpose of why you need this set up.

How to create cash on demand to fund your account?

If you are serious about saving, then I am going to show you a few tips to get you going. All of this can be done within 30 days of course, there are many ways to save money but you may have a problem because you have so many options.

The first and foremost way is to save from your income. Decide how much you need to save for that emergency, for example: let say that your car has been acting up on you but the problem is not serious yet. But once that problem exposed itself, it will cost you in the neighborhood of $500 for repairs.

That is how much you need to plan for that emergency. So decide how much you can save a pay period or monthly to reach that goal. If saving from your income is not an option right now, try this for size.

Have a yard sell or use E-bay to sell unwanted items, try pawning items you no longer want, call your creditors and advise them you are experiencing unexpected circumstances and that you need to skip a payment without any penalty.

Try reducing some of your household expenses, challenge yourself to clip $100 in grocery coupons and use them on your next grocery trip and put the $100 savings in your emergency fund.

Try carpooling for a month, with the high cost of gas today you should do pretty very well. Start a pocket change jar and at the end of each day, just empty all your change there. If you do this for a year, you will be well surprise of what you have accumulated.

Where to park your emergency fund

This money is design to be liquid, in other words you have easy access to it, whenever you need it. I do not recommence Certificate of Deposit right now because it will tie up your money, if you cash out early there is a penalty for early withdraw. Stay way from Stock, Bond or any investment with risk or that will tie up your money.

This emergency fund need to be place in a high interest saving account without monthly fees. This account is not design to make you money or use later for investments. It is a emergency fund and only that, for you and your family.

You may open up a money market account, there are many good companies out there doing a fantastic job managing your money, however; these money market funds are not guaranteed by the FDIC. You may also check with your own bank.

How much to save

One problem savers have is knowing how much to save, this is one reason why they never get started. I am going to make it easy for you to set a goal so that you can get started now.

First determine what your total mortgage payment or rent payment are. Now multiply it by three months, okay take your auto payment if you have one and multiply it by three. Add everything up and that is your minimum target goal to start with.

Why did I select your house and auto payments? Well, you need a place to live and a car to drive to get back and forth to work. If you lost your job, this will help you buy some time until you find other employment, it also slows down a possible foreclosure / eviction or repossession. This method is a minimum to get you started and once you secure these funds, you can start on other needed household expenses.

The best time to set up an emergency fund

The best time is before there is a crisis, so lets put a few coals on the fire now and put together a back up plan so that you will be ready. Use the above example concerning your house and car to start.

Are you covered on your job for short and long term disability? or do you have a individual policy? If not, talk to a insurance agent about covering 60 to 70 percent of your income. Check with your current auto/homeowners carrier first. There may be a discount for multiplies policies.

Are you a member of Triple AAA Auto Club/Allstate or your gas card program? I have been a member of Triple AAA for 12 years and I do get my money’s worth. Look into these programs.

Do you have a friend or family member who works for the airline? Do they have buddy passes that are available to you? Check this out, it could save you hundreds of dollars.

Is your credit report coughing up blood? Fine, then instead of feeling sorry for it, let do something about it. How about repairing it, start repairing it now so that if and when you need it, you would have prepared yourself if a emergency arise.

A bad credit report will cause you to pay very high interest resulting in hundred of dollars in additional payments, if you are purchasing a house, car or other high ticket items.

If you are just getting by on your income, consider a part-time job until you reach your emergency fund goal or other projects. Make additional money by starting your own business, you know the one you been thinking about for the pass five years. Now is a good time to start.

Do not max out your credit cards, pay them down, put them in a secure place. This will be your emergency line of credit. Do not use your line of credit to  buy groceries, internet purchases, furniture or going out to eat. I suggest you take a class in money management if you have a problem in this area.

Remember, our only goal here is to established a emergency fund and put together a emergency back up plan.

You now have the fundamentals to get started, you can implement this program in less then 30 days. You are the only one holding you back.

I just share with you what you need to do first, what purpose for the emergency fund, where to park it, how much you need to get started and a back up plan. There you have it, make up your mind and get started now.

Copyright 2007 – Bobby Johnson – All Rights Reserved. You have my permission to published, broadcast or distributed this article as long as it’s not modify in any way.