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The only thing in life that never changes is the fact that things change. While today might be bright and sunny, you can bet a rainy day will eventually arrive. Problem is we never know for sure when that rainy day will come. This is why having a financial safety net is important. Setting a little something aside can make a rainy day seem less bleak because you’ll have something to fall back on.
Stuff Happens
Let’s, for a moment, say you’re a resident of the Old Dominion State and your hot water heater suddenly decides to let go. A Virginia car title loan can be a reliable way to get your hands on some fast cash—if you owe less on your car than what it’s worth. On the other hand, you’ll be able to deal with the problem without taking on debt with some ready cash set aside for unplanned expenses such as car repairs, medical emergencies and layoffs, all of which can take a toll on your financial wellbeing.
How Much is Enough?
The ideal amount to have set aside varies from person to person, as well as from situation to situation. However, most experts agree that three to six months of your monthly expenses is a good place to start. However, any amount you can put away comfortably each month is a good thing—even if it feels like an insignificant amount. Having something on hand is always better than having nothing at all.
Building Your Emergency Fund
Establishing a budget you can live with is a good place to start, if you have yet to do so. Begin by figuring out how much money you have coming in each month. Then calculate how much cash you’ll need to cover all of your bills each month. The difference between the two is how much you’ll have to create your emergency fund, invest, and enjoy. Doing this will also give you a good idea of how much you need to put away to flesh out your emergency fund. By the way, most experts advise creating your emergency fund first. That way, you’ll be in a position to deal with emergencies without disturbing your savings and investments.
Windfalls Can Help
We stumble into some unexpected cash every now and then. It might show up in the form of a bonus at work, gifts from relatives, a tax refund, or any of a number of other sources. Resist the temptation to blow it on something you want, wherever it comes from. Use it to do something you need instead. Add it to your emergency fund if it isn’t completely built out. Use that money to invest for your future if your emergency fund is complete.
Getting Into the Savings Habit
Putting money away consistently is a good habit to cultivate. Setting a SMART savings goal is a good way to accomplish this. SMART stands for Specific, Measurable, Attainable, Relevant, and Timebound. It always helps to have a specific reason to save a measurable amount you feel is attainable for reasons that are relevant to your life—within a specified amount of time.
In Summary
As the old saying goes, “Into each life, a little rain must fall.” This is why having a financial safety net is important. Making the effort to put away at least three to six months of your living expenses will stand you in good stead when that rainy day comes. Creating and sticking to a budget will help you get this done. Planning to use windfalls to help bolster your fund can help, as can getting into the savings habit using the SMART goal-setting technique.
