Have you ever had to go into debt or eat into your savings because of an emergency expense coming up that couldn’t wait? Maybe your washing machine broke down and you needed to replace it? Or your car had to get a repair that you hadn’t counted on? Did you ever have a plumbing issues that really had to be fixed as soon as possible?
In most of these cases you often can’t NOT pay for the expense as that would only create more problems, damage or costs. But if you don’t have any money set aside that you can call upon for when these types of unexpected expenses come up, it can be almost impossible to find the money to deal with the problem in the moment without either taking on more debt or using money from your savings that was potentially already earmarked for something else.
The fifth challenge of our 31 Challenges this month is to therefore start putting together an emergency fund. In that way you will always have some money set aside to deal with emergencies such as described above. Aiming for roughly $1,000 is usually a good guideline, but of course adjust this as needed.
Find ways to get this money together as soon as possible – the money you are saving by limiting one expense (see yesterday’s challenge) is a good place to start. Empty out drawers and bags for loose change, organize a yard sale or think of other options to make some extra money. Then once you have your fund together and whenever you are faced with an emergency and need to take out money, strive to fill it back up to those $1,000 as soon as possible to never run out of money.
As always, let us know how you’re doing and what other ideas you have in order to get this fund together in the Facebook group or via a tweet with #31DayChallengeToFE. If you would like any more ideas on which expense to limit, please refer to step 16: Start and Emergency Fund of the 100 Steps Mission to Financial Independence.