During this time of economic recession it is more important than ever to build an emergency fund for oneself. Oftentimes it is the last thing someone thinks about when setting up a budget, but this is a mistake. As I have discussed in earlier blogs, you never know the economic challenges that life will present you with at any time.  

Not having an emergency fund can lead to a vicious cycle of debt. You may tell yourself you have too many debts to be able to save money. But let’s look at what may happen to your debt situation if you do not develop an emergency fund. Suppose there is an emergency in your life. You will more than likely have to use credit to pay for it. As a result you will be in even more debt. Certainly paying off debt is necessary, but so is saving at least a small amount each month.

Here are some suggestions for building a nest egg for emergencies:

• The best place to start such a fund would be in an account that will allow you to make withdrawals at anytime and that will add interest. One place to do this would be a savings account, but there are also some checking accounts that do accrue interest.
• The first issue to address is the minimum amount you should have saved. You should have at least enough money to pay for three months worth of living expenses for you and your family.
• There is an old adage that many people have heard, “pay yourself first.” When it comes to an emergency fund this is exactly what you should do. When you pay your bills each month, be sure to pay your bill to yourself, i.e. to your emergency fund.
• If this requires more discipline than you may have, consider attaching the account with the emergency fund to your primary bank account, and set up automatic transfers each month. This will circumvent the moment of indecision about putting money out of your paycheck aside.
• If you have been making monthly payments on a debt when it is paid off, continue to pay the same amount each month but into your emergency fund instead. If you have already been putting aside a certain amount of money to pay for a debt each month you can definitely afford to continue doing so.

If you have any questions and live in Colorado please feel free to contact me. I am here to help. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.