Emergency Preparedness: Financial Reserve
Not all disasters are natural disasters or ones that effect entire neighborhoods. Some just affect your family. When hard times hit it is comforting to know you can pay your bills and feed your family.
Way back when I began this blog it was because we knew our money was going to be tight for a few months. As it turned out we needed our finical reserve to stretch for more than a year.
I have heard the recommendation of putting 10% of your income into savings every month for emergencies.
Dave Ramsey suggest getting a 1,000 dollar emergency fund, paying off all debt, if you have any, and then building your savings to a 3-6 month fund.
When the financial storms come you will also be surprised at all the things you are able to cut out of your budget. You are simply able to live on less.
I've know people that have been out of work for months. What a comfort for those that have- and a nightmare for those who don't have- a financial reserve. And you avoid more debt.
This isn't something you build up in one month- it happens over the course of many months. Being consistent and aware of your money is the key.
Savings is worth it.
