Hey there! We had a crazy warm day here in Missouri...70-something! We had the windows open and the door to the screened in porch open (which made the cats happy...it's there favorite spot in nice weather). However, it is supposed to be in the 30s on Wednesday...boo! Mother Nature can be so cruel!
I apologize that I am late posting this. If you haven't been following my money management series and would like to, you can catch up by reading Making Your Money Behave...Gain Control Over Your Finances Part 1, Tell Your Money Where to Go...Gain Control Over Your Finances Part 2, and Living on Cash...Gain Control Over Your Finances...Part 3 to catch up.
For those of you trying to gain control over your finances, today we are talking about building a safety net (aka an emergency fund). This is a must when working on gaining control over your finances. Think about this...you are working soooo hard to pay off your debts, living on cash, doing a great job of sticking to your budget and saving money where ever you can. You haven't put anything in your savings account because you have been so diligent about putting every penny to debt repayment. Your washing machine bites the dust and would cost more to fix than makes sense. What do you do? You don't have anything saved so you put it on credit, right? You have to have a washing machine after all.
One of the "baby steps" Dave Ramsey teaches is to put aside $1000 as fast as you can before you start paying down your debt. If an appliance dies, car breaks down, you have unexpected medical expenses, etc., $1000 in your savings account would be there as your safety net so you wouldn't need to use credit to bail yourself out of the situation. I know $1000 may not cover every emergency that comes up, but it would cover most of them.
Next week we will talk about paying off debt. In the meantime, if you don't already have $1000 in a savings account for emergencies, think about how you could come up with those funds. You could sell some things on Craigslist or Ebay, have a garage sale, take an extra shift at work, or find a part-time job. Once you have done your budget, can you find $1000 you can save such as canceling or reducing cable/satellite expenses, getting on level payment plans with your utilities, canceling the newspaper (you can get your news from TV or the internet), eating fewer meals out, etc. It may take a little creative thinking, but most people waste a lot more money than they think. Once you have a written budget, you will be able to see what areas you can reduce.
The important thing about your emergency fund is to keep it somewhere that is easy to get to. It's not meant to be an investment. We keep ours in a savings account at our local bank. Remember, this is for emergencies only...not a cruise, not a new outfit, and not concert tickets. ;)
Next week we will talk about debt repayment...yippee!
If you have any questions, feel free to comment or email me.