Secret Stash
Well, it's not really a secret. But you may want to pretend it is. It's your Emergency Fund. Stash that money away and don't even look at it as available money to spend.
What is an emergency fund and how much should I set a side? Start with the beginner amount. This is $1,000. If you have debt you are paying off, except your mortgage, get this beginner amount of $1,000 set aside before making additional debt payoff payments. This $1,000 is JUST for emergencies such as a water heater that goes out or an unexpected car repair or medical deductible. This is definitely not for the new pair of shoe,s that just went on sale at a price you "cannot" pass up but need some of this money or you can't buy it without borrowing, emergency.
If you are debt-free, except your mortgage, your emergency fund now must jump to the next level. Before paying down your mortgage with extra principle amounts, beef up that emergency fund. How much should you increase your emergency fund by? The best way to calculate how much you need is to first determine how much money you need to live on each month. Then multiple this amount by a minimum of 3 months, but 6 months is best.
This beefed up emergency fund is for unexpected loss of income, such as a lay off from work or a medical issue that would prevent you from working. Then you have at least 3 months of emergency funds available until you can regain that income.
And don't forget, if you use any of your emergency funds, you need to replenish them soon as possible.
You can master your money... and I can help!
Contact Michelle Serna by filling out the Contact Me form.
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