by Heather, January 10, 2012
Saving money can be difficult especially if you are struggling financially due to job loss, under employment, excessive debt or a host of any other reasons. But starting a savings plan with an emergency fund is critical if you want to see yourself on the positive side of the cash flow sooner than later.
There are several thoughts on how to figure out what amount is a good amount to keep in your emergency fund. Many people that have never been good savers many want to start with just $1000. That is just $20 per week for 1 year. That can be do-able for most people, even on a tight and strict budget. On the weeks you can afford more, move more over and try and grow your emergency fund to a larger amount.
Things to look at for a grand total to what you should be saving are your housing costs. Should you lose your job and need to get onto assistance, many states take up to 30 days to get that assistance going. Having at least one mortgage or rental payment saved is a good rule of thumb. Do you carry medical insurance? What about living expenses? Many people recommend saving at least $1000 for major car repairs in addition to living expenses and that is a great idea especially if your car is out of warranty. Look at your total monthly living expenses including food, car, etc. and strive to save at least one month of expenses.
Once you have the one month saved, go for 3 months. I have always been told 6 months is a solid and safe target and then the excess over and above that can be moved into other savings vehicles for retirement purposes on a quarterly basis or in increments of $500m or $1000. Make sure that you also have some cash available for emergencies like Weather issues, family issues and the like. Being caught in a true emergency without cash can limit your choices.