You don’t have to look very far in the financial world before you find a host of advice demanding you keep an emergency fund. This fund is meant to cover everything unexpected, from car repairs to bill maintenance when you lose hours at work, or get a pay cut. This article will overview how to get started building your emergency war chest.
Examine your thinking
Look into why you don’t already have a war chest. Challenge your thinking. How were you planning to pay for unexpected expenses (they happen to every one)? How much trouble are you saving yourself by thinking about this now instead of when disaster strikes? Once your thinking is in line with the importance of a war chest fund, it’s time to start talking logistics.
Crunch the numbers
How much can you afford to be putting away each paycheck? Financial experts have varying ranges for how large a warchest should be, but most agree it should be at least 3 months (often more like 6 months – 1 year) of expenses. Take the time to assess how much you can contribute, budgeting for current expenses and spending. This number crunching will prepare you to make the commitment itself.
Don’t feel bad if it isn’t a huge amount right off the bat, any saving is good saving. Slow and steady will still win the race, the key is a savings commitment.
Open the war chest account
The next step is to open up a separate account for these savings. Separating savings from expense accounts ensures that you don’t overspend into your savings, that in fact you can’t. Try to make sure you can’t access it instantly to further remove the temptation.
Automate your committed deposits
You’ve crunched the numbers. You know what you can afford, you have an account to put it in, and you’re ready. So commit, automate those deposits. Remove the decision aspect of committing every pay check by automating the withdrawal.
Supplement wherever possible
Now that you’ve committed to a certain amount, all that you have to do is stick to it – and supplement it where you can. The more you contribute, the faster it will grow, so make it a savings game and goal.
Having a war chest will really give you security and peace of mind that comes with knowing that you’ve prepared for the future. There’s no better way to ensure that you’re safe for the future.