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Ways to Budget for an Emergency

Would you believe that 66 percent of American families have less than five months’ worth of income saved for an emergency? And a whopping 28 percent have no emergency savings at all, according to a 2012 survey by

Emergencies happen all the time, unfortunately. When it comes to emergency repairs and replacements with home appliances, having money set aside can be a lifesaver. You’ve heard it time and again: It’s important to set aside three to six months’ expenses for an emergency fund. Easier said than done, right? If you have a lot of debt, live on a fixed income or have unpredictable expenses, putting aside that much money can seem nearly impossible. The good news is you don’t have to do it all at once – even a little money in savings can go a long way.

Start Small

Starting small is the key to successfully building a solid rainy-day fund. If you’re too focused on finding an enormous chunk of money with which to start saving, you may feel overwhelmed. So, start by putting aside a little each week, even if it’s just $10 or $20. Waiting too long can put you in a crisis if you need to replace a washing machine or do some rewiring in your home.

Want to make saving even easier? Go automatic. Have the money taken out of your checking account automatically each week and deposited into some kind of savings account. You won’t have to think about it, and you may not even notice the money is gone. Over time, you may realize that you can afford to set aside more money each week, and your balance will grow faster.

Set a Goal

Setting clear and realistic goals is the first step to achieving wonderful things. Know your emergency fund target amount by calculating your total net take-home pay for eight months. Visualize reaching your goal and track your progress along the way. Start slow, stay steady, and watch your stash of cash grow bit by bit. Avoid the temptation to dip into your fund for any reason except legitimate emergencies. You’ll be surprised how having this little self-made insurance policy gives you extra peace of mind.

Sell Your Stuff

This is an easy way of getting cash for your emergency fund. Take a good look around your living area and see what you use and don’t use anymore. Even if it isn’t much, sell the things you’ve been meaning to get rid of and stash that cash away. Start sticking mental price tags on all of those old clothes, unused electronics, old video games and idle bicycles. Sell on eBay, post on Craigslist, host a yard sale, or work with a local consignment shop to turn that clutter into cash. Devote your windfall to your emergency fund.

Bare Minimum

Have a base $1,000 in an emergency fund before tackling debt repayment. If you use some of this base fund, you halt any extra debt-repayment or savings goals until it’s replenished. This amount won’t change the world, but it will go a long way toward dealing with a standard car or home repair or medical issue, the most common types of real financial emergencies.

The best time to start saving for a rainy day is when it’s not raining. It is generally a good idea to have enough cash to cover three to six months of essential living expenses. Start now, start small, start slow, and before you know it, you’ll have enough money set aside to help protect yourself and your loved ones in case of an emergency.
Granted, building an emergency fund from scratch takes a bit of perseverance and discipline, but it doesn’t have to be all labor. As with any focused project, you’ll be surprised how energizing small successes can be. The key is being creative in your methods, communicating your intentions, and staying consistent over time. Before you know it, you’ll have an emergency fund that will not only help you in a financial pinch, it’ll help you sleep at night.