Most of us have good intentions to save money and to follow a budget. Our plans may even work for a time until something goes wrong–you get a cavity, your washer breaks, or the car needs tires–these unexpected events turn into unexpected expenses that wreck our budgeting/saving plans and may even cause us to go into debt. That is why the first step to financial peace is establishing an emergency fund.
An emergency fund is money you set aside for the unexpected expenses that come in life. Having money set aside for emergencies helps you break the cycle of always living from paycheck to paycheck. Dave Ramsey claims that as you set money aside for emergencies the unexpected events decrease–thus having an emergency fund is “Murphy Repellant.”
$1,000 is the amount needed to fund your initial emergency fund ($500 if you make less than $20,000 annually). Financial Peace University encourages you to set this aside as fast as you can. Then as emergencies come, you can use the fund instead of relying on credit cards or budget breaking to bail you out. Keep your emergency fund in a separate account (it can’t be easy to access when you spent too much at the grocery store or find something on Amazon you just have to buy). A money market or dedicated savings accounts are great places to keep your emergency fund.
Have you tried this? If so, did it help? What was your experience. We’d like your feedback.
I think this is a great suggestion. I did this while in the financial peace university class and it helped becuase I worried less about emergencies happening. Soon after I did this my car needed an unexpected $800 repair, but I had money set aside to pay it with the emergency fund, so it saved me from just putting it on my credit card.
It definitely decreases worry and stress.
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