Building an Emergency Fund

If the last few months have taught me anything, it's to expect the unexpected. Even though you may have your budget worked out to a "T" and stick to it religiously, you still may be faced with changes in your life that are beyond your control—such the stock market plunging, home or auto repairs, a job loss, unexpected medical expenses, higher gas prices or an extra cold winter that doubles your heating bill. These unexpected changes can be stressful enough. The last thing you want to do is intensify the problem by being forced to rely on high interest credit cards or have to search through your address book to see who you can ask for a loan. Think about how much less stressful these situations would be if you had an emergency fund.

Many people put aside the idea of starting an emergency fund because they think it's something they will put together when they have some "extra money." The truth is, you need to change your mindset, because you may not get an inheritance from a rich uncle you never knew of, or an unexpected bonus from work! If that actually happens, I doubt "let me put this into an emergency fund" will be the first thing to pop into your mind!

The key is to start small. Can you shave $5 off your spending this week? Maybe start throwing your change into an "Emergency Fund" coin jar and see how it adds up? Get a plain coffee instead of a latte tomorrow morning? Get some Kool-Aid packets instead of buying bottles of soda and other overpriced bottled drinks next time you go grocery shopping? Try making a meatless pasta dish for dinner tonight?

The point isn't how you save, or how much you start saving initially, it's the fact that you get in the habit of saving. So be creative and try to find money in unexpected places by cutting back or making substitutions. Even if your emergency fund only totals a few dollars after a few weeks...it's a few bucks you didn't have before!