Weathering the storm

Whether it is the health of you or your family, the downturn in the economy, or the loss of your job, you need to know how to create an emergency savings. 

You may need to save enough money in a savings account to cover not just one emergency, but several occurrences at the same time.  Consider if you or a family member becomes ill and you have to leave your job or lose your job.  Then you are not just in need of emergency funds for cover your monthly bills and expenses.  You will need funds to cover medical expenses.  But try to begin saving for one occurrence at a time.  Once you have reached your goals to cover expenses for that particular emergency, you can then begin to save for additional occurrences that may occur.  Work on each goal one at a time.  Do not stretch yourself too thin.  Enjoy the money you work so hard for, just be responsible.  Be prepared for the what ifs in life.

An emergency savings established in case of job loss should cover your monthly bills and expenses for 6 to 9 months.  So if your budget for every month averages about $2200 per month, then to cover 6 months of monthly bills and expenses you will need to save at least $13,200. 

How to save enough money to create an emergency savings….

1. Budget your monthly bills and expenses
2. Reduce expenses whenever possible.  Compare and look for savings in mobile phone plans, cable service plans, auto insurance, credit cards, etc.
3. Determine the amount of money on average that you will have available every month after monthly bills and expenses have been paid.
4. Divide a comfortable amount of the money available after monthly bills and expenses are paid into 4.  The sum will be the set amount of money to be deposited into the savings account every week.
5. Set up an automatic transfer into a savings account scheduled to deposit the set amount of money into the account every week.
6. Be persistent.  Stay focused on the ultimate goal.  Do not stray away from the plan.  It won’t happen overnight, but with time it will happen.

Example:

If you have $2200 in monthly expenses and you want to create an emergency savings for 6 months in case of job loss, you will need to save $13,200.  You bring in a monthly income of $3500.  By saving $130 per week (52 weeks/yr.), preferably by arranging automatic transfers into a savings account through your bank, you will create an emergency savings within two years of $13,520.

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