Personal Emergency Fund

In this day and age, it’s never been more important to learn to save for your future. With all of the financial hardships that individuals are suffering from ranging from layoffs to hours cut to downsizing, it’s no wonder that people feel the stress when it comes to their financial security. Therefore the notion of a personal emergency fund has never played a more important role. Whether you are single and living on your own or contributing to a household income supporting children, everyone should be thinking of the worst case scenario. If you don’t have a personal emergency fund, you are doing a great disservice to yourself and it can create a sheer panic if the worst were to happen. Don’t let that happen, think through what you can do to protect yourself from financial hardship.

You’ve probably heard the phrase “pay yourself first” and this has been a motto that I have personally lived by. Starting small makes this concept very manageable, but you quickly see how this can work for you. Treat paying yourself as a monthly bill, just as you would pay money into your car loan or your mortgage, treat putting a certain percentage of your income aside as a necessity. Figure out what percentage of your income you can put aside each paycheck and then put it directly into savings each pay period, treating it as money that you never even had to spend.

While investments are a necessity for your long term financial future and should be something that you think about, a personal emergency fund provides some peace of mind for the short term. The rule of thumb is that you should put aside at least enough to sustain you through a couple months. So if for example you were to lose your job, you should have enough in your emergency fund to allow you to pay your bills and live for at least 6-8 months. The more you put money aside each paycheck without even thinking about it, the more this fund will grow.

If you are in a position to be able to have a portion of your check deposited directly to your savings account, all the better. Whatever you can do to get that percentage of your income into a savings account is imperative and you will be so happy you did so, particularly if you are ever faced with hardship. So stop and take inventory, think through what you can realistically put aside each pay period and dedicate a savings account solely to your personal emergency fund. This small and simple step can provide some excellent peace of mind in the turbulent times that we are all living through.