Emergency Fund

Having a reasonable emergency fund can be invaluable. We never know when life is going to throw us a curve ball, and if we are not ready then things can be really rough. Do what you can to prepare yourself so that life's unexpected events can be a little smoother.

Things happen. Sometimes its a medical emergency, sometimes we loose our jobs, and sometimes are car decides to fall apart. No matter what it is, we have to assume that every once and a while, life will hit us smack in the face. If we are not ready, then things can get ugly very quickly. Setting aside an emergency fund can take some time, but it can help make these events a little more manageable.

The biggest question on most people minds is "how much?" How much money do I need to set aside, just in case. Unfortunately this is not an easy answer. Some people will say you should have $500-$1,000 set aside, and other will argue that you need at least enough to live on for a year. I would recommend somewhere in the middle. If your a single person living alone you expenses might be low enough that $1,000 might be enough to cover most situations. But if your married with a few kids you will probably need more. I normally try to have at least 2-3 months worth of living expenses set aside for emergencies. You might be safer with more, and less might be enough, but for me personally that amount feels right.

Once you have started setting money aside for your emergency fund, don't touch it! If you start digging in their for every little thing like a new car or a big screen TV, you are defeating the purpose of the fund. You have to define for yourself what an emergency is, but make sure that you only use it in those cases. If you do come across a situation that requires you to dip into your emergency fund, make sure you replenish what you took out as soon as possible.