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Examining Emergency Cash Reserve

Set a goal for yourself. All families is expected to have a cash cushion of at least three months' worth of expenses. In other words, estimate just how much cash you dish out each month on essentials, times that amount by three, and that's your minimum goal for emergency savings. If you typically spend $3, 000 a month, you want to include at least $9, 000 put away in a reserve account not to be touched unless you absolutely need to.

Even then, if you use your Debt Relief Cash of $300 a month to put towards your Cash Reserve and divide it into the $18, 000, you will get 60 months-- FIVE LONG YEARS JUST TO BUILD UP YOUR CASH RESERVES, and you will still have your debt to tackle. Another emergency cash reserve article worth reading: rest of article continued here.

Should you take the conventional road and start personal finance in the conventional way, you can absolutely conserve your cash reserves or emergency fund in about 5 years-- but still have most or all of your debt. After that, should you require to build on your emergency fund, say for example you lost your job, it may take you 8-10 months to search for a new job. As well as, you may have consumed your emergency fund, still have debts and you're back to square one.

Continuing This Conversation About Emergency Cash Reserve

Should you try to save more? Absolutely. How much more depends on exactly how you feel you will need to be in a position to 'sleep at night. ' I know people who keep two years' worth of expenses in a special account. Anything over that is probably excessive, but better too much than too little. You are going to love this; http://www.kiwibox.com/lyingtroup419/blog/entry/118574223/when-you-re-emergency-cash-reserve-is-gone.

Every single time your paycheck is deposited, your checking account is configured to automatically sweep money into a separate savings account you have set up for your rainy-day fund. I suggest you begin by putting 5 percent of each paycheck to your emergency account until you reach the goal you set for yourself.

When building these emergency reserves, you may wish to save this money in a money market fund that has a higher interest rate than the normal bank savings account.

Once you have made the commitment to funding a rainy-day account, the next decision you are required to make is where to park it. I used to stress the importance of locating a location that would get you a reasonable return on your money. But these days, with interest rates at rock-bottom levels and the stability of many financial institutions still in question, I worry more about security.

The reason most people do not have any emergency money in the bank is because they have what they presume is an emergency every month. What is a valid emergency? It isn't just needing to purchase a new dress for that upcoming party. Or finding an amazing set of wheels for your car at a once-in-a-lifetime deal. Or deciding you have got to have a new dishwasher because the old one is making noise.

A real emergency is something that has an effect on your survival, not just your wish to be comfortable. So unless your family is preparing to go hungry or be thrown out into the street, you shouldn't be dipping into your emergency fund.

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