GUEST BLOGGER: ELIZABETH DAVIS
Why do I need an emergency fund? The reason is simple really, we don’t know what is going to happen. Money guru Dave Ramsey recommends starting with a $1,000 cash emergency fund. This is SEPARATE from long-term savings and should be immediately available in case of emergency. After debt is eliminated, then save enough to cover the basic expenses without income for 3 months. This number will vary for different family's situations. What I would like to discuss is the first step. Saving $1000 dollars. Sound overwhelming? My recommendation is to make a plan that can work for YOUR situation.
I read Dave Ramsey's Total Money Makeover as a newly married undergraduate student. Initially I was overwhelmed by the prospect of saving $1,000. Then we discussed it as a couple and set the goal to have $1,000 cash saved within a year. In order to meet this goal, we found ways to earn additional money. My husband mowed lawns, I cleaned houses and we set that money aside. It took us 11 months of working extra and going without to save this money. Having an emergency fund has provided an increased peace of mind that is fantastic.
One recommendation is to keep this fund somewhere other than your checking account. Create a place for it, whether that’s cash in a safe (my personal preference) or a savings account dedicated specifically to emergency funds. Once you reach your goal of $1000 determine what your next goal will be. Whether its debt elimination or increasing your emergency fund, making and setting financial goals is an important habit to start and maintain.
Okay, so we have a goal to save the first $1000 and a plan to do it, now we need to determine what constitutes a financial emergency? A financial emergency is when you have an unexpected expense which needs to be paid in order to continue functioning. For example, an unexpected car repair, a broken refrigerator, or a doctor's visit. Some examples of non-emergencies include a great sale on leather couches, wanting a pedicure, or some retail therapy.
For additional tips on building an emergency fund and additional information on financial wellness, I highly recommend Dave Ramsey’s The Total Money Makeover.
For more financial emergency preparedness tips, follow Utah Money Moms on Facebook. We are sharing daily tips, Monday-Friday, during the month of September!
Ramsey, D. (2013). The total Money Makeover: A proven plan for financial fitness. Nashville,
Tenn. : Nelson.
SNL Skit “Don’t buy stuff you can’t afford” https://vimeo.com/199334296
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