Found Money: How To Generate
Quick Cash In An Emergency
Start to Build your Emergency Fund
Finding money during an emergency can be
very difficult if you fail to plan. Establish emergency savings
in both good times and in bad. The chance is very good that you
will be called upon to put out a sum of money on the spot and
when you least expect it.
It is a very good rule of thumb to sock
away three to six months’ living expenses. You can also use this
same money when you’re faced with major, unplanned expenses such
as a car that breaks down or much needed college funds.
The purpose of this type of savings plan is
to put the money away consistently, and then tap into it for
true emergencies. The success of this type of long-range savings
plan will depend less on the rate of return than on, day-by-day,
putting the money away and then leaving it there for a true
emergency.
Lock it away and then hide the key.
People who are living on a fixed-income
will have the toughest time setting aside money for emergencies.
If you can manage to just squeeze out another $10 or $20 each
month and sock it away into a money market account, it’s worth
doing.
If you decide you need $2,000 in an
emergency fund, look at what you can afford to sacrifice each
month from your current budget and then look at that sum of
money as a bill to pay yourself. Decide on a monthly amount and
then put that same amount aside every month and then watch it
grow.
Once you have reached your goal of $2,000
you’ll now be in the habit of putting away that extra set amount
each month. Keep on doing it.
Financial planners echo the idea of
treating your emergency fund as a bill. Put the money away each
month, but don’t be tempted by the latest sale. You are not to
touch the amount, except for in an emergency.
Putting money aside on your own is hard.
Retirement plans are successful because the money comes out of
your paycheck before you can get your hands on it and because
there are taxes and penalties for early withdrawals.
Stashing money away in an easy access money
market account takes discipline. Limit your access to the
emergency fund. You can have immediate access to some of the
money, but not all of it. The bulk of the fund is to be used,
strictly, for emergencies and nothing else.
Once you have saved up about two months of
living expenses, move one month of expenses to a one-month CD.
When the CD matures, roll the principal and interest into
another one-month CD. Your savings will grow well this way.
As you continue making regular payments to
the emergency fund money market account, you will soon have
another month of living expenses that can be used to invest in a
two-or three-month CD. If you are wishing to set aside six
months of expenses, continue the process until you can
comfortably purchase a six-month CD. Your savings will
accumulate quickly this way.
Building your Emergency Fund
Before you start stashing away your money
for an emergency, the first step in building your emergency fund
is to figure out just how much money you have to put aside in
the first place.
People often don’t know where they’re
spending their money. Once you can account for every penny, it’s
a lot easier to decide where you can cut back and start to
save.
You can’t always account for emergencies so
it is more critical to build the fund as fast as possible.
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