Developing A Savings Plan

Emergency Funds

Getting your finances on track, especially after being in debt, can seem like an arduous task. But no matter what your situation, it is important to build an emergency fun in case of emergencies. This fun can help you stay afloat in case of a lay off, illness, family emergency, or other unexpected expense.

How Much to Save The average time it takes to find employment is four to six months. So, logically, you should reserve four to six months of living expenses in your emergency fund. When figuring what your living expenses are, include rent or mortgage payments, all bills, food, insurance, and other expenses that are necessities. You can keep as little as three months of expenses if you have a spouse that also works, though your expenses from two people are probably higher, making the amount saved balance out.

Building Your Account To build your account quickly, take as much discretionary income as you are comfortable with each month and place it in a savings or other interest-gaining account. You can have funds automatically withdrawn from your paycheck so you won’t be tempted to spend it in other ways. Confused about where to start? Consult your budget and determine if you can spare just $50 a month to put in your emergency fund. Because you aren’t really “spending” this money, you don’t have anything to lose.

A Backup Plan Though it is recommended that you do not use credit accounts while in a debt management program, having a credit card can be your back up emergency plan. You should only use your line of credit on a card with the lowest interest and only use it in a true emergency. Of course, the best plan is to have the actual funds saved in a separate account and you will never have to worry.

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