Emergency Funds: Or What Number for My Savings Goal I Want (Right Now)

Readers, you can see that I have basically no savings. Anything that disrupts the monthly budget (well in theory if I had one…but I’m working on that) basically got put on credit. Hence the downward spiral.

So before I can even start considering my future of savings towards investing…I need to simply start saving towards an emergency fund to help support no use of credit cards.

Trent at The Simple Dollar has a great post about his emergency fund and how it helped him when the brakes on his truck. This is exactly what I’m talking about. He writes:

This cash reserve should be as liquid as possible (a high-yield online savings account is just about perfect) and should contain at least $1,000 (at first) and eventually six to twelve months of your household’s take-home salary (eventually).

Liz Pulliam Weston over at MSN.com last month talked about why you need $500 in the bank in her money column. She acknowledges that most talk about financial cushions centers on the importance of an emergency fund, that stash of cash that’s supposed to equal three to six months’ worth of expenses. But for those of us crawling out of debt, that can seem like an unreasonable goal.

Her tips on getting to $500 first for an emergency fund:

  • Start by keeping an extra $100 in your checking account. If you maintain this pad and resist the urge to spend it, you’ll greatly reduce your chances of bouncing a check.
  • Then funnel $400 into your savings account. It may not seem like much, but $400 will cover a good chunk of the real emergencies that come your way, from car repairs to insurance deductibles to replacing an appliance that breaks down.
  • Then leave it alone unless you’re facing a real emergency. If you’re in credit card debt or owe money to payday lenders, you must get out of the habit of looking for a quick “fix” when you encounter unexpected expenses.
  • Tell it, Liz!

    $500 or $1000? Well, I’m setting my goal for $1000 primarily because I’m single and a homeowner. It all rests on my shoulders so I want a little extra cushion than Liz recommends. But we will celebrate on this blog when that number hits $500, too.

    I will keep $100 in the Bank of America savings account for the overdraft protection on my checking account. When I get over that amount, I will funnel it into a higher yielding online bank savings account. More on those in a future post.


    1. 1 Savings -- How many different accounts/divisions do you have? « Debt Free For Life

      […] Savings — How many different accounts/divisions do you have? April 4, 2007 at 9:46 am | In Uncategorized | WordPress’s widgets are getting the best of me today. I was trying to edit my emergency fund savings total to $63, but it’s not getting saved. Gremlins in the system perhaps, but regardless — I’m up a tiny bit towards the goal of $1000 for my emergency fund. […]

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