Having an emergency fund could save the day, but you may be questioning how much to save, when you should save more and how you should spend these funds.
You're not alone in asking these questions! And we're here to help!
Start with Three Months
Everyone's emergency funds will be different amounts based on your necessary expenses. The suggested recommendation is to add up all the monthly bills you have to pay (rent/mortgage, water, electric, groceries, etc.) and multiply that number by at least three. Your emergency fund should be able to cover your monthly expenses for at least three months.
There's no limit to how big your emergency fund can be. Saving more than the recommended three months will allow you to be even more prepared for the future.
The best tip in saving for your emergency fund is to make saving a habit rather than a set goal. If you can make a life-long habit of saving money, you may have more financial success.
When Should You Save More?
You might consider trying to save more (closer to six months' worth of expenses) if one of these scenarios applies to you:
- You have a niche (hard to find) job
- You live in an area that has a high cost of living
- You do not have other financial support (spouse, friends or family)
- Others depend on your income (stay-at-home parent, kids or pets)
- You own an older home or vehicle
What Should You Use Your Emergency Fund For?
Once you have your emergency fund in place only use it for real emergencies. Using those funds to buy something you want, but don't need, will only cause financial setbacks and keep you from preparing for your future. You can use your emergency fund if you lose your job, have an unexpected medical bill, incur necessary home repair costs, have a sick pet or need to make car repairs.
Now, it's time to start saving! Contact the office if you would like to talk about tightening your budget and finding ways to start adding money to your emergency fund.