Replenishing your emergency fund

We can’t emphasize the importance of an emergency fund more. We’ve already posted on how to build up your own emergency fund.

Let us expound on the topic. Given the recession, you should have at least six months to a year’s worth of living expenses as emergency fund.

First of all, let’s be clear on what things do you actually need an emergency fund for.

What are emergencies anyway? Your mother-in-law’s birthday is not an emergency. Your anniversary isn’t an emergency. These are events that happen yearly so there’s no reason to consider them emergencies.

A blown water pump in your car is an emergency. Hospital bills from your kid’s broken foot from a skateboarding accident is an emergency. Getting laid off is an emergency.

So in such unfortunate instances, you’d only be thankful that you have your emergency stash to tap into. But what do you do after? Once your affairs are in order again, well, you should replenish the fund, of course.

It might take a few sacrifices again such as deferring buying that new widescreen TV but it’s always important to keep your emergency fund topped up.

Rainy days come fast and plenty these days so why leave a nasty gash on your umbrella?

Building an emergency fund

One of the greatest personal finance lessons that many should’ve learned during this recession is to have an emergency fund. The massive job cuts across industries and foreclosures left many jobless and homeless.

Thing is, life tends to screw you over big time once in a while. It might be as communal as a recession or as isolated such as having a major boo-boo at work. So everyone has to be prepared.

Traditionally, the emergency fund’s money that you stash away that should cover at least three months’ worth of expenses. During the early parts of the recession, many believed that it should be six months’ worth. Now, the safe number seems to be enough money for a whole year.

Here’s a guide to having one:

1. Build an emergency fund – This is basically a savings project and would require you to probably employ some lifestyle changes. You have to commit part of your income to it. If you feel that a year’s expenses is a tough target, then plan for a three-month emergecy fund first. Remember, you have a target and the sooner you get there, the better.

2. Protect your emergency fund – By no means should you tap into your emergency fund, unless, of course, it’s a real emergency. Fancying that new iPod? Make it a separate savings project.

3. Replenish your emergency fund. – So the poop hit the fan. Big deal. At least you won’t be living like a hobo for the meantime. Just be sure that you work your way to earning again and prioritize earning back what you spent of your emergency fund.

5 Secrets of successful savers

Money easily comes and goes. At some point in our lives, we sincerely swore to ourselves that we’ll start saving. But despite those solid intentions, most of the time, we end up failing. Saving becomes a larger problem when you’re still paying off student loans or other types of debt. Below are the five secrets of successful savers. Maybe you can follow their lead.

They started slowly. The first few steps are the hardest. Don’t force yourself into slashing 10% off your salary if you still can’t. Start saving a small amount towards bigger savings.

They read about financial and economic news. People who pay attention to financial news while saving are called ‘active savers’. Being updated on the financial and economic news can help you learn basic principles that are essential to making your savings grow.

They save regularly, often through automated systems. This is made easy through online banking. You can try inquiring with your HR department on the option for an automatic savings account where your paycheck can automatically go every payday.

They find saving pleasurable. This might sound odd – to enjoy depriving yourself of the pleasure of spending. But teach yourself to enjoy saving. Just think of the benefits of financial security.

They first began saving as a child. You might not be able to do something about this at this point in your life. But you can always teach your future kids to be savers. Successful savers started young and their parents taught and encouraged them to continue doing it for financial stability.