Getting Out of Debt_5 Step 3 Build Wealth and Security But First Build an Emergency Fund
Getting out of debt_5 takes us to Step 3 which is to build wealth and security. You remember Step 1 is on knowing where we are while step 2 is on knowing where to save. So now we come to Step 3 where we will try to build wealth and security. For this though the first thing to do is to build our savings. We had a head start on this when we learned in Step 2 where to save.
You probably have started saving but continue doing that until you have enough emergency fund to cover eight months of living expenses. Some say three to six months of emergency fund to cover household expenses is enough. Whatever it is, it’s crucial to save for a rainy day. Instead of buying the latest ipads and other luxuries, start saving for an emergency fund today. We will discuss here how you can do it so getting out of debt_5 is that much easier.
Saving for an emergency fund is a wise move but it is a difficult one to achieve. First, we have to see how much we spend a month. Let’s start with how much a family spent in 2010 which is $48,109 according to the U.S. Department of Labour. Divide that by 12 and we come up with monthly expenses of $4009.08 on the average so yours may be higher or lower than that. We are just using the average so we’ll know how to crunch the numbers.
Multiply the average monthly expenditure by 8 months if you are building an emergency fund for 8 months and what have we got? It’s 32,072.64. You might think of that as a lot of money but you are aware of the economic uncertainty of our times. The car can break down, the bread winner could become unemployed and someone in the family could get sick. This can easily make your efforts at getting out debt_5 much harder to achieve.
But wait, instead of giving up, let us make it more doable by trying to build an emergency fund for three months and that would mean $12,027,24. That’s better for the start, isn’t it? Then once we get going, it will be easier to come up with another three months of emergency fund. I have news for you though. Saving for retirement is much much more than building an emergency fund.
Now that we are on the same page, let us see how we can come up with $12,072.24 in the least painful manner. Let us make that even easier by rounding down the amount to save for an emergency fund to an even $12,000. We need to make a plan and then follow that plan until we reach our goal, that is save $12,000 for the rainy day. This way our effort at getting out of debt_5 will not be in jeopardy.
Cancelling the cable TV and the cell phone are the easiest ways to come up with the money for the emergency fund. Some people easily pay as much as $200 for both cable TV and cell phone. These two items alone will enable you to build your emergency fund of $12,000 in five years.
Those are only some of the ways you can get started with building the emergency fund. There are some more ways and I would like to give you different scenarios as to how you can implement your ways to save the emergency fund which will help in getting out of debt_5.
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