Whether you have been laid off, furloughed or salary reduced, you need an emergency savings to fall back on more than ever.
What’s your emergency savings account look like? Suze Orman suggests that you have eight months of income in your emergency savings. Dave Ramsey and Jean Chatzky both say 3 to 6 months. Hello Wallet suggest that you think of emergency saving in three ways – minor emergencies, major emergencies and job loss. Bottom line, you need an emergency savings account.
As with any goal, start with a plan – then automate it. When we started our emergency savings, our goal was to save $1,000. That would get us through the unexpected small expense. We started by saving $20 per week to reach that $1,000 goal in one year. Maybe that’s not possible in these challenging times, can you find $5 per week. While you are home, it’s a good time to review your bills, to find savings. Take a look at your credit card / bank statements, are there automatic changes you are paying for and not using? Can you replace an expense with something free? Can you reduce an expense to save money?
Once you accomplish your goal, I would like you to about your next savings goal. Sometimes unexpected emergencies cost more than you expect, especially if you are a homeowner. I have always thought that the major repair emergency fund should be in the $5,000 range. So then we started on this goal. $100 a week gets you to $5,000 in a year. We divided this between both our paychecks. My husband gets paid weekly so he contributes $50 each week. I get paid every other week, so I put in $100. We then have achieved this goal of $5,000 in a year.
Remember, this is not a save for one year and done type of thing. You may need to use this money, so you need to replace what you use. You can never have too much money saved for the what if’s of life.