5 STEPS TO BUILDING

YOUR FIRST

EMERGENCY FUND

An introductory guide to building your

emergency fund and how to succeed at it

FINANCIAL RESCUE LLC

LOG

TABLE OF

CONTENTS

Introduction

• Start Building Your Emergency

Fund by Knowing your Net Income

• Have a budget and stick to it

• Pay your debts

• Save and build a saving habit

• Manage your finances

Takeaway

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Admit it, life is good.

In today’s world, everything you want is just around the corner.

You have a job that pays well and a bunch of credit cards that

gives you access to funds anytime.

All you have to do is drive to the nearest store and wham, you’re

back with the latest and shiniest gadget your heart so desired.

But while spending is alright as long as you can pay without

drowning into bad debt, have you ever thought of building your

safety net in case tough times pop up from the good life?

This safety net, which catches you in case you fall hard, is what’s

often called “Emergency Fund.” It is an amount of cash you save

to help you get through your daily life in times of emergencies.

Many of us never realized the importance of such fund until an

emergency happened and we had no one to turn to.

If you don’t have an emergency fund yet, it’s about time to get

yourself one. Here are some tips.

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CHAPTER

1START BUILDING YOUR

EMERGENCY FUND BY

KNOWING YOUR NET

INCOME

Your net income is what you get after paying your liabilities andexpenses, such as utility and credit card bills, insurance, and monthlyamortizations to name a few. (Note: This is different from your networth.We’ll talk about that in another post.)

Update March 1, 2015: What is your net worth?

If you have no idea how much this figure is, you don’t know how muchyou can allot to your fund.

Start Building Your Emergency Fund

by Knowing your Net Income

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CHAPTER

2HAVE A BUDGET

AND STICK TO IT

Most of the time, it’s impossible to know your cashflow in one go.

What you can do is allot 30 days to list down your daily expenses.

Add all these up at the end of the month and you’ll get your

approximate expenses. This amount would constitute your

monthly budget for expenses. Nothing more…but it can definitely

be lesser than this amount. If it’s 50% or 70% of your income,

great. But if it’s 100% or more of your income, you definitely have

work to do. Budgeting allows you to have financial control because

it forces you to see how fast your money leaks out of your wallet.

It is a goal-setting mechanism that challenges your mind to take

action…in this case, avoid overspending.

Have a Budget and Stick to it

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CHAPTER

3PAY YOUR DEBTS

This is quite crucial as it will be nearly impossible to start

saving anything if you have unpaid debts, especially credit

card debts that pack huge interest rates. If you have unpaid

debts, we recommend taking on this problem first.

Climbing your financial goal would be a lot easier if you

unload some of your stuff before you start the climb.

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Pay Your Debts

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CHAPTER

4SAVE AND BUILD

A SAVING HABIT

Saving is difficult and that’s a fact for most of us. Saving,

however, is just another habit that can definitely be acquired.

Remember the aphorism: man is a creature of habit! Start

small, even if that may mean saving 10 dollars a day. That

makes for $300 a month and $3600 a year. Small is better

than nothing at all. Don’t put it in an automatic savings

account yet. Remember you’re building a habit, a conscious

effort at the start. Put it in a place where you can see your

wealth building up, your secret army growing every day.

Save, save, and keep saving until it doesn’t hurt not to spend

anymore…until it becomes automatic for you. The typical

recommended Emergency Fund amount is 3 to 6 months’

worth of your expenses. Now don’t let that bother you too

much. The important thing here is you have decided to take

charge and start saving for your emergency fund.

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Save and Build a Saving Habit

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CHAPTER

5MANAGE YOUR

FINANCES

Building your emergency fund, however, is the easy part.

From now on, you will have to commit to managing your own

finances, controlling your spending habits and paying off your

credit card debts on time to avoid costly penalties.

Otherwise, you might just find yourself digging into your

emergency fund.

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Manage Your Finances

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“Life happens”, as some people say. Emergencies are part of

our lives as normal human beings. We cannot avoid them but

we definitely have a way to minimize their effect on us and

an emergency fund – aside from financial help and emotional

support from our families – is one way to achieve it.

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Takeaway

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“ There is no better time to start building your emergency fund than right now. ”-

Source

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