How To Budget For Emergencies

Need to Budget For Emergency Funds? Yes. Emergency funds are critical to have on hand for financial security. Having emergency funds provides you with financial resources to resort to and depend on when an emergency arises: such as getting sick and running up huge medical bills, or unexpected home and car repairs. Without emergency funds, you'll find yourself running up huge credit card debts that could take several years to repay. And of course you'll be paying much more with the interest those cards generally add. However by simply putting an extra thirty to fifty dollars every month in an individual "emergency savings account" you'll be in a much better position financially to deal with any emergencies that might arrive. It's easier to put this money away regularly if you think of it as an additional household expense, or bill. Require that it be paid on time each month, to ensure you'll have the funds on hand when needed. This extra emergency fund money should be entered into your overall household budget like any other bill you have, and if need be it can even be - and you have online banking - set the payment up to automatically be moved to a savings or mutual fund account every month. This way you won't forget about it, or be tempted to skip it when money is tight. Ideally, your emergency fund account should hold enough cash at all times to cover at least three months worth of living expenses. Most of us can't pull three months worth of money out of our budget all at once, so the only way to effectively do this is build up to it slowly over time. Also be sure to never touch it for anything other than actual emergencies. Keeping an emergency fund isn't the same as investing. You won't likely make any significant interest or profit from it. Keep in mind though, that this fund isn't meant to be an investment. Instead, it's insurance in a sense. It's there solely to take care of you and/or your family if an emergency comes up. And it's there to be immediately accessible if the need ever arises. In order to successfully put away money for emergencies of course, you'll need to first know where your money currently get's spent. So you'll need a solid budget. Figure out how much money you have coming in every month - spendable money, not gross. Then figure out the cost of every single expenditure you have. If some things change each month, such as utility bills, estimate or average that expenditure. Once you know how much you must spend on the neccessities in your life - including putting aside something for emergencies - you'll be much better equipped to keep up with it all. If money is tight though, don't take from your emergency fund just to have fun money. Instead, curb your extra spending. It won't hurt to eat at home an extra evening each week if that means you and your family will be taken care of when emergencies arise. So, start your emergency fund today, no matter how small the contributions might look. It all adds up over time and you'll be extremely happy you did this should any emergencies come up.