Create an emergency and a sinking fund

Financial Planning

This is one in a series of 10 posts to help you get, and remain, financially healthy. It’s best to start at this post. [click here]

Let’s face it… life is always throwing us curve balls. Unless you’re prepared to deal with life’s pesky little hiccups they will derail your lifestyle… sometimes quickly.

Additionally, those larger purchases we need from time-to-time (such as new tires for the car or those quarterly car insurance payments) seem to sneak up on us. If we are unprepared, we end up making these purchases with a credit card… bad idea in my opinion.

A better the solution:

Go back to your “cash flow statement,” your “plug the holes” activities, and your “debt management plan.” Review these to come up with a reasonable amount of money to put into a savings account each month. I suggest building your emergency fund to an amount between $1500 and $2000. With that figure in reserve you can pretty much cover most small emergencies, as well as, those intermittent large purchases.

Following this plan will keep you from getting stressed out over small emergencies as well as those infrequent, but larger, purchases.

I guess you’re beginning to see how all of these statements and activities are working together. Okay… what’s next? Let’s make sure your credit is not hijacked.