Now till Retirement

Do you have an emergency fund set up? What the hell do I mean by emergency fund you ask? I am talking about money set aside for the unexpected(hopefully in an high interest bearing savings account). Most people sadly will answer no to this question when it most definitely needs to be a resounding yes. Without at least a couple months worth of expenses put away, you are tempting fate to lash out at you and bring in some sort of high cost mandatory bill. You never know what may happen… your car might call it quits, you might be injured, you may be laid off, etc. What are you going to do when you need money in these instances without an emergency fund?

Most people turn to credit cards, and treat them as their emergency fund. This is also bad… very very bad. Credit cards have their uses, but never if you can not afford to pay them off. The reason credit card companies make as much as they do is because people get themselves trapped be it stupidity in use or sheer desperation when crisis(what we are discussing here). If you take out high interest debt when in a bad situation, it is probably only going to make things worse, so rather then do that… we are going to plan ahead to make sure that isn’t ever necessary.

How much do you need to spend a month? Mandatory expenses only(shelter, food, utilities, transportation) anything that can be cut without a second thought(cable tv, going out, coffee shops) in a crisis doesn’t really matter. Once you figure out that number you want to have that amount times four to eight months… wherever you feel comfortable. This number may be high, but it will be much much higher to use credit to deal with problems so we are going to work towards reaching this number as a goal.

Figure out how you can fund your account(anything will do cut back expenses, do online surveys, work overtime, part time job, whatever) and begin adding as much as you can a month until you reach your goal, there may be setbacks(those crisis’s we were talking about), but with money in the fund you will be able to handle them better and bounce back much quicker then if you had used debt.