I recently shared a post suggesting budgeting categories and how to quickly get an idea of monthly income and spending. You can check that out here: https://thebridwells.com/2020/08/24/budgeting-categories/
Today I wanted to touch on emergency savings and give some things to think about when creating a specific fund or amount. I have mentioned emergency accounts in my savings post and financial lessons (linked at the bottom). I think this pandemic has taught us many things, including how important it is to set yourself up financially in case of emergencies or special circumstances.
I would love to know any tips or suggestions you have!
1.Emergency Fund Is Separate From General Savings
When you are creating an emergency fund, mentally or physically separate it from your general savings. This amount is not intended for trips, wanted purchases, kid activities, etc. It is solely designed to be there as your safety net in case of emergencies or special circumstances. Think of it has money you have in case a job was lost and bills need to be paid or something out of your control happens with your home, car, etc.
2.Decide On Desired Amount
Decide as a family what amount you want to keep as your emergency stash. Generally you want to have 3 months of total income plus additional for owning a home. If you own a home you know any maintenance needed is not cheap. Our mindset was if we ever needed to replace something we had the amount needed for it. We padded ours to also account for anything additional. This is specific to each family and lifestyle, but definitely have a desired number or goal.
3.Do Not Touch/Use
Once you have reached your goal, that amount is off limits. Other savings is fair game, however don’t consider that as “savings”. When we are assessing our finances I never take into account our emergency fund as money we have saved because we know we are not touching it until it is truly needed. If you need to actually move it away from your general savings, think of transferring it to a different savings bank.
Do you have an emergency account?
5 Tips To Saving Money: https://thebridwells.com/2020/06/03/5-tips-to-saving-money/