So, they are not a suitable home
for emergency funds in case the washing machine breaks down or the roof needs repairs.
I would argue to at least have some sort
of emergency fund in place before starting to pay off debt aggressively, but after that, go at it!
Everyone is familiar with checking and saving accounts which are used to build pay bills and
build emergency funds but there are other types of accounts as well.
That way we will be prepared when those bills roll around without dipping
into emergency funds or freaking out.
At our house, however, we decided to have an even larger
emergency fund with 8 - 12 months in savings.
Keep emergency funds in a separate account so it's harder to whisk the money away for expenditures that are not true emergencies.
There's a ton of information out there
on emergency funds and why it's important to have one.
These particularly anxiety - inducing times are usually considered financial emergencies and are the exact reason that individuals
create emergency funds which they set aside in a separate savings account.
I would suggest that you
use Emergency Funds for things that have a Low likelihood of happening but if they do happen can be devastating.
She especially needs with
emergency fund at such a low income and no access to credit.
Whether you need much cash in your retirement portfolio is probably a question separate
from emergency fund issues.
But even our family never really had a solid
cash emergency fund of a few thousand dollars until the last year or so.
We currently have about 2
months emergency funds built up, and will have about about 3 - 4 months by the time the wedding occurs.
Way more expensive than I had planned for, but I have a good
emergency fund so it worked out.
The solution is simple: if you have a well -
funded emergency fund in a savings account somewhere, you can raise your deductibles some without worry.
Most articles
about emergency funds recommend that the average person put away three to six months of income.
Also, just because it is supposed to be a readily available
emergency fund doesn't mean that you shouldn't be trying to get good rates of return.
To help families overcome financial barriers, the county also
provides emergency funds to help pay for rent and utilities.
The money that belongs in secure investments is things
like emergency funds where it doesn't make sense to take market risk.
This method works best once you've gotten a
small emergency fund started, and you feel pretty in control of most of your financial life.
If you have a
good emergency fund make sure to count that, and any taxable savings and checking accounts or CDs as part of your cash!
I think it is pretty clear that a high level of predictability costs should not use
emergency funds while a low level of predictability should.
Put a fixed amount of your regular paycheck into a special
emergency fund account; use payroll deduction or electronic funds transfer so it happens automatically each month.
Instead, create a plan and add any extra expenses to your budget when you can, focusing on creating a stable
emergency fund first.
My wife and I saved up 12 months of
emergency funds before I started my own business, which gave us an enormous amount of security.
I suppose the solution is to have a big
enough emergency fund that does the same thing, but the problem isn't the credit cards, it's simply how they are used.
If you do not have an
adequate emergency fund saved up, you should consider saving for this prior to applying any extra money to paying down your debt.
You can't really rely on credit cards for
emergency funds given the recent credit squeeze and it's just not a good practice.
One of the most popular places for
emergency funds right now, online savings accounts offer the sweet spot of liquidity and interest rate.
If I had taken the time to save a solid
emergency fund then I would have felt less stress in my situation.
If you can create a solid
emergency fund over time, you'll have a system that prevents you from having to rely on your credit card in those emergencies.
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