What would you do if you were hit with an unexpected $1,000 bill? Learn how you can protect yourselves with a starter emergency fund!
What would you do if you guys were hit with an emergency? How big does it have to be before your budget breaks?
$100? $500? $1000? More?
This weekend we had an emergency to deal with when our cat had suddenly gotten ill and we had to rush him to the hospital.
Thankfully he’s now on the mend, but between the hospital bills, diagnostics, medicine, and recovery we’re looking at $1,500.
Years ago, this would’ve been a struggle. Now, though, having an emergency is a part of our financial routine.
Why You Need a Starter Emergency Fund
No matter how careful you are, life still happens. Cars break down, kids get sick, emergencies pop up at the most inconvenient time. So if you haven’t already, it’s time to have a starter emergency fund up.
How Much to Save in Your Starter Emergency Fund?
It’s helpful to think of your emergency fund as part a protection plan that is built up in layers.
Even before you start knocking down your debt, it’s smart to have some money stashed aside for hiccups in the road. As a general rule of thumb, $1,000 can cover many emergencies.
Once you have your starter fund, you can then focus in on paying off your high-interest debts like credit cards. These debts will drain you quickly if you let them linger so knocking them out will give you some breathing room in your budget.
You two can then talk about whether you want to go gazelle intense on your other debts like your car loans and student loans or if you want to split your money (like 80/20) where most of the money is used to pay off your debts and the rest is to build up your emergency fund.
The focused approach will get you out of debt faster, but for some couples, one spouse is still anxious with just a starter emergency fund, so they follow a hybrid system.
Getting Your Starter Emergency Fund Up
If you two are ready to get your emergency fund ready but you’re having a hard time finding the money to do it, please sign up for our free course – 5 Days to $5K.
It will help you learn how to find save and earn extra money without getting a second job or living on rice and beans!
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Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..