Banking Law

Twelve Personal Finance Mistakes - Emergency Funds

By Eugene S. Melchionne, Connecticut Consumer Attorne

Every good budget needs an emergency fund.  What is an emergency fund?  It is savings that you have put aside for that unplanned expense that just has to be paid.  It is not for impulse buys.  It is for that car repair that needs to be performed so you can get back and forth to work.  Or in these days of out of control medical costs, something to cover that uninsured medical deductible.

There is some debate as to how large the emergency fund should be.  Some say it can be as little as $1,000.00; others say it should be as much as 6 months’ worth of living expenses which can be $20,000 or $30,000 or more.  Imagine not having to worry about when your unemployment checks run out or missing work for an extended period of time due to illness.

As with the planning process and setting goals, it is best to take baby steps.  Start small.  Put aside a small amount and then continue to add to it every pay period.  Forget that the money is there.  Do not let it burn a hole in your pocket.  Let it sit, let it grow in the savings account.  You will be surprised how fast it can grow if you just let it alone.

Remember, cash is king.  If you have cash (especially in these times), you might just be the king!

Full post as published by Debt Law Network on June 01, 2009 (boomark / email).