SavvySugar

5 Steps to Rebuilding Your Emergency Fund

SavvySugar — Wed, 15 Apr 2009 08:30:23 -0700

Meeting your emergency fund goal is a huge accomplishment. So, when it comes time to spend the money for an urgent or unexpected purpose like paying a big tax bill, draining the fund you worked so hard to build can be extremely disheartening. Having to fork over funds you've spent several months saving is a letdown and it's easy to lose momentum. The best way to stay on track is to revise the road to rebuilding your emergency fund; here are simple guidelines for doing just that.

Set a two-part goal: how much money you want to save, and a deadline to squirrel away that amount.
Play around with my savings calculator to help you determine the specifics.
If you'll need to save more money per month than you have been, consider tracking your spending for a month for a clearer picture on where you can cut back.
Adjust the amount you have automatically transferred from your checking to savings account each month to reflect your new savings goal.
Redefine what is an emergency, and only use your fund for those predetermined purposes.

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How Long Could You Survive Without a Steady Paycheck?

SavvySugar — Thu, 12 Mar 2009 09:30:21 -0700

Emergency funds are more important than ever, but most people still haven't built theirs up enough to get through unemployment. Just take a look at the results from a recent MetLife study that asked Americans to evaluate how they'd fare if pink slips were handed to them.

50 percent of Americans say they are only one month - or only two paychecks - or less away from not being able to meet their financial obligations if they were to lose their job, and more than half of these, a startling 28 percent of the total respondents, couldn’t survive financially for more than two weeks.

How long could you get by without a paycheck?

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Resolve to Live Below Your Means in 2009

SavvySugar — Wed, 31 Dec 2008 11:30:24 -0800

The concept of spending less than we earn seems simple enough, yet many of us struggle to put the idea into practice. Living within your means is a great start to financial stability, but living below your means is a way to ensure that this path isn't disrupted.

Step one is eliminating a reliance on credit cards for anything but emergencies. Step two is creating an emergency fund so that you don't have to pay interest when an unexpected expense arises. This year, I suggest resolving to live below your means so that you have money left over for a substantial emergency fund.

Create small goals for yourself so the overall idea doesn't seem overwhelming. For example, instead of setting a goal to save $3,000 in 2009, aim to save $500 by March and so on. You're more likely to achieve your goal when the end doesn't seem so far away.

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Money Tip: What to Do When You're Done With Your Debt

SavvySugar — Tue, 21 Oct 2008 12:30:58 -0700

Forty-seven percent of you have credit card debt, and another 12 percent of you are almost finished paying off your balances - keep plugging away! It's common to lose momentum in becoming financially healthy once you are rid of debt; enjoy the feeling of having a huge weight lifted from your shoulders, but avoid the temptation to relax your rein on spending.

Hopefully you were able to put some money aside while paying off your credit cards, but when you're done with your debt, turn your main focus to saving and building an emergency fund. Replace the spot in your budget for debt repayment with deposits to your savings account. It will be satisfying to make those monthly transfers and watch your own account grow, rather than remitting your plus-interest payments to the credit card companies.

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Definition: Debt Snowball Plan

SavvySugar — Thu, 28 Aug 2008 15:30:09 -0700

Personal finance guru Dave Ramsey developed the debt snowball plan as the debt repayment part of his method for getting finances on track. The plan is based on psychology and relies on determination. The debt snowball plan goes as follows.

Save $1,000 in an emergency fund.
Pay off smallest debt first to create momentum for sticking with the plan. If two debts have similar balances, first pay off the one with the higher interest rate. Continue making minimum payments on all other debts.
Once you have paid off one card, add that payment to what you're currently paying on the card with the next lowest balance.
The plan suggests that the compounding payments and momentum from reducing the number of credit cards with balances should get you out of debt quickly.

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Money Emergency? Which Resources to Tap First, and Last

SavvySugar — Thu, 21 Aug 2008 08:00:27 -0700

When disaster strikes and your internal panic button ignites, your frazzled instincts might tell you to tap into the first financial resource that comes to mind. Practice damage control by knowing which actions will cause the least harm to your overall financial health, and which will threaten it the most.

CNN Money lists 17 ways to get your hands on cash ranked from the best to worst. I can't say I completely agree with their rankings - it's beyond me why selling hard assets is seen as a worse way to get fast cash than borrowing against your home - but if you want more explanation on any of the following items check out their article.

Tap your emergency fund.
Sell some non-retirement investments.
Ask the folks for a gift.
Bust into a CD early - it's cash you already own.
Cash in your whole life insurance policy.
Borrow from family or friends.
Take out a home-equity line of credit.
Do a cash-out mortgage refinancing.
Borrow from your 401(k) or 403(b) plan.

Discover the other eight progressively worse ways to raise fast cash when you read more.

Borrow against other investment accounts.
Borrow from strangers on sites like prosper.com.
Tap your IRA.
Do a reverse mortgage.
Sell some hard assets like artwork or jewelry.
Take a cash advance on your credit card.
Liquidate your 401(k) or 403(b) account.
Absolute worst: Go to a payday lender.

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How Much You Need in Your Emergency Fund

SavvySugar — Fri, 08 Aug 2008 12:30:08 -0700

More than half of you are still building up savings for a rainy day or haven't been able to save anything just yet. In order to be sure you're on track or to set a goal in the first place, you need to determine how much you'll need if emergency strikes. The biggest case for an emergency fund is job loss - if you lose your job or temporarily lose your ability to work then you'll need to rely on the money you've saved to get by.

Standard advice says that a solid emergency fund has three to six months of living expenses. Determining our individual (or family) living expenses is necessary to know if we're on track to support ourselves without income for a few months. CNN Money recommends reviewing the past three months of bills and expenses to figure out a monthly average. They remind us to include certain expenses in our calculations. Check out its must-include expenses when you read more.

Mortgage (or rent)
Utilities, including bills for cable, Internet, landline, and cell-phone service.
Groceries.
Insurance premiums, including home, auto, and life. Add in at least $400 for individual health insurance - 1,000 for a family - in case the partner whose work provides it is the one to get laid off.
Other car expenses including gas and loan payments.
Property tax (if not included in the mortgage payment)
Discretionary spending. Be realistic! Certain things may be easy to cut, but don't delude yourself into thinking you can suddenly make a drastic change.

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Your Two Cents: Do You Have an Emergency Fund?

SavvySugar — Thu, 24 Jul 2008 14:00:27 -0700

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You're Fired! Are You Prepared?

SavvySugar — Wed, 09 Jul 2008 12:35:07 -0700

We're taught to keep a first-aid kit in our car's glove box and jugs of water in our cabinets in case of emergencies, but preparing for a job loss isn't something that's a given when thinking about disaster prevention. Unlike buying canned items in bulk, there isn't anything that we can pick up at the store when we're setting ourselves up for success after potential job loss.

Even the most realistic person may find themselves uncharacteristically optimistic when reviewing their work situation because getting fired is just not something any of us like to think about. Learn some job-loss preparation tips when you read more.

Here's a quick list of things you should do while you're still employed. Job loss can be overwhelming, so do yourself a favor by taking some steps to get a few necessary things in order before the ax drops.

Keep an up-to-date résumé. If you lose your job, you'll be ready to start applying for new ones immediately without skipping a beat.
Consider creating a LinkedIn profile or joining another professional networking site that caters to your field.
Reconnect with old colleagues. If you had great working relationships with colleagues from a past job but haven't had contact in a while, don't lose touch! Send an email, pick up the phone, meet for coffee, but don't let these valuable connections slip through your fingers just because you don't see them every day.
Hold on to the business cards given to you at your friend's Friday night cocktail party. Networking is the best way to build a collection of valuable contacts.
Build your emergency fund so you're not panicking when you realize that next paycheck won't be coming, after all.

Photo courtesy of NBC

Six Tips For Finding Extra Money to Start Your Emergency Fund

SavvySugar — Fri, 23 May 2008 04:19:55 -0700

Because everyone prioritizes his or her spending needs and wants differently, you'll never catch me telling you that you should be spending a certain amount of your income in one category or another. Budgets depend too much on how much money you bring in, your cost-of-living, and your debt situation for me to suggest how to allocate your funds. So, while it's up to you to decide how your money is best spent, I will tell you that having an emergency "rainy day" fund is a key component of feeling more financially secure and can save you from debt-tragedy if an emergency were to arise.

Here's how strongly I believe in building a savings cushion: even if you're not going into debt because of your lifestyle, I would argue that if you don't have any savings to fall back on it can be as detrimental as living beyond your means. I'm not talking about a down payment sized account, because it's true that any savings is better than none. Figure out how much you want to save and put a deadline on it - and use our savings calculator to do the math! The very best way to stick to a savings goal is to have the money transferred from your checking to savings account before you have the chance to spend it, and once you've figured out a way to cut your expenses so that you have extra cash you'll be on your way. Many people have expressed their exasperation at trying to find the money to contribute to savings, and for my tips on where to find extra money read more.

How many nights do you go out with friends? Cut it back by a day (unless your answer was one night) and find an alternative - maybe have friends over instead of going out.
Is your gym one of the more expensive ones in your city? There are certainly cheaper alternatives and you won't have to look too far.
Close to paying off a credit card? Put what used to be your monthly payment into your emergency fund.
Do you find that you're constantly throwing out perished items from your refrigerator or stale pantry items? That means you're not shopping smartly and are buying things that you're not sure you'll use. Write down the ingredients you'll need for the week's meals and buy only the items on your list, and if it's unrealistic that you'll grocery shop each week, plan to make certain meals during the week and pick up the ingredients the day of when you're out and about.
Do you get your nails done every week? Think about changing to every other week and save the difference.
If you live in a city and rely on cabs to transport you on evenings out that can come out to be $20 if you go out both nights. Consider sticking to places in walking distance for a while and saving your would-be cab fare instead.

You don't have to cut things out of your life that you enjoy, just scale back slightly and modify. Once you're in the habit of saving, you'll find more and more ways to boost your emergency fund. Keep in mind that the best way is to automate your savings - you're less likely to spend money if it's in your savings account and you have to make the conscious effort of transferring to your checking account if you want to spend it.

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