Experts have recommended having three to six months worth of expenses as the starting goal for an emergency fund. Many consumers may feel that this is the impossible, especially when working on debt repayment plans and living expenses that seem to drain the income as soon as it enters the bank account. The truth is, things happen in life that is unexpected – there are illnesses within the family and job loss that can cause the sudden loss of income which can become overwhelming to the personal financial situation.
If you are living on a tight budget, where can you find the additional funds needed to pump up the emergency fund? The process begins with determining the income which is coming into the household.
At all times, ten percent of this income should be deposited into the savings account each time a paycheck is received. Finding small changes within the budget and places that you can tweak the budget to save money can lead to this savings being a manageable amount. Consider bringing your lunch to work with you daily or cutting out the daily latte on the way home from work to find room to boost the savings account. These small changes will do wonders for the personal finances and preparing for the future.
Upon starting new savings, it is important to open a different savings account, apart from the ones that are used on a regular basis. This will allow for restricted access to the money and improve the chances of the money being saved. At your local bank, a high interest savings account that can yield the highest investment when it comes to creating an emergency fund. Arrange for deposits on a regular basis to be transferred to the savings account from your main account, at intervals that coincide with the date of payment and income.
An emergency fund can provide a welcome alternative to credit cards. Rather than being charged interest each month, the consumer can make money from the funds that they have deposited into a high interest savings account. There comes a time in the financial situation when many consumers realize that they are out of options when it comes to credit, an emergency fund allows these consumers to establish financial security in the form of preparing for the future.
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