Did you ever wish, that when the washing machine breaks down you don’t go into the overdraft or reach for that credit card to get it repaired or buy another machine? Or when the car goes in for the MOT and fails? Or worse you lose your job? We can all have plans we can all be saving for the washing machine that you know will breakdown soon and for the car that has not sounded quite right but it could all happen tomorrow. Are you prepared for that?
We loosely follow the Dave Ramsey baby steps and the plan suggests a starter emergency fund of $1000/£1000 which I think is a good start to aim for. There are a few suggestions below to try and get this as quickly as you can. This will be there to ensure you don’t go into your overdraft or pick up the credit card it is a change for you to become debt free.
Once you are in a debt free position I would aim for more but how much is down to your situation. How much does a basic budget cost monthly for your family (no fancy extras you’re in an emergency)? How long would it roughly take to find a new job? We are aiming to fill ours again to 5 months but anywhere from 3 to 6 months is a great aim.
Trying to find money in an already possibly tight budget can seem like a daunting task. But what if you look at the emergency fund separately? Allow your usual income to cover your monthly budget and look at extra ways to make up your emergency fund. Here is a few examples:
- Work a few extra shifts, 2 or 3 a month could soon add up.
- Sell stuff – you will be surprised how many things you either have duplicates of or things you didn’t even know you still owned.
- What do you love to do could it make you a little extra money by making a little side job?
- Survey sites and cash back sites.
What is an emergency?
Is this item unexpected? Is it needed right now? So the washing machine that breaks down when you have three children I say yes to an emergency. That one last Christmas present because she would just love it I say no you knew Christmas was coming and she really won’t mind or remember the present you are about to dip into your emergency fund for.
Where to put your emergency fund?
You may want to keep a small amount at home for ease of access but only do this if you won’t go into it for next weekends takeaway. We personally don’t have any at home as I could justify £20 here or there.
Look for an easy access savings account you want somewhere that if your dishwasher leaks all over the floor while your reading this you can get to the money straight away. There maybe some better interest accounts but if you can only take money out once a year and you withdrew money when the dishwasher leaks what happens if you then unfortunately lose your job?
Do you have an emergency fund? Have your started one? Or has this post at least made you think of one?