3 Tips for Setting Up an Emergency Fund

I recently learned first hand the importance of having an emergency fund. Thanks to some unavoidable doctor visits between the months of September and October I ended up spending about $400 on copayments, medication and new contact lenses – and that was with insurance!

While it hurt to swipe the card (hey, might as well rack up those airline miles) I knew that these visits were a necessity. I also had the comfort of knowing that although I was shelling out a lot of dough I wouldn’t be in too bad of a financial state when it was all said and done.

Why? Because I have an emergency fund set up.

With each check that I get whether it be from ad sales, freelancing or my day job I set aside a percentage for emergencies. That way when these little emergencies pop up (and let’s face it they WILL pop up) I already have it covered.

Now, I know it may not be necessarily EASY to start saving money for future occurrences like doctor visits and car problems when you have bills to pay, but think of it this way – you won’t have to rack up any significant debt later on because your emegergency expense is already paid for.

Besides,even starting small can be effective. Below you’ll find some tips to get your fund set up and ready to go.

1. Calculate how much you can put toward an emergency fund each month.

Be honest here people, if you can give up Starbucks or eating out here and there you can save a lot of money to put toward your own emergency fund. Take a look at your monthly income and fixed expenses. Then calculate how much you have left over, how much of that left over money you spend on crap and where you can make some cuts.

(P.S. If you need some help seeing exactly where your money is going I highly recommend Mint.com. Seriously, it’s probably the best thing to happen to personal finance in years.)

Once you have figured out how much money actually you have left over split it into percentages. I try to save 10% of every check I get be it from ad sales, freelancing or my day job. Of course, there are some months where I have to adjust it slightly – but the point is I always strive for that 10%.

2. Set up an online savings account and name it “Emergency Fund.”

Part of the problem with just having one generic savings account is that you never really know what you’re saving for. One of the reasons I like online banks like ING Direct is that you can open a ton of different accounts (with no fees) and give them all nicknames so you know exactly why you’re saving your hard earned cash. Oh, and did I mention that online banks have way higher interest than regular brick and mortar banks?

Go to an online bank, open an account, link it to your checking and start saving money! They really can’t make it any easier for you.

(P.S. Already have at least $250 to save and want to make an extra $25? I still have ING Direct Referrals left! Shoot me and email if interested abella [dot] amanda [at] gmail [dot] com)

3. Make sure to PAY YOURSELF FIRST every time you get a check.

Before paying the credit card, the bills or the rent make sure you have alloted your Emergency Fund money into your savings account FIRST. It can be very easy to forget to save when you have bills to pay, that’s why it should always be the first thing you do even if you’re just transferring over $5.00.

Quick Updates and Some Link Love

In case you missed it make sure to check out my first ever video interview with Lindsay Hunt from The Boomerang Kid! We discuss gen y issues, money, career, personal finance, the upcoming ebook and more!

Also make sure to check out my guest post over on All Groan Up, 3 Atrocious Tips for Gen Y and feel free to put in your two cents!

As for some link love here are some of my favorites from across the web this week…

Why I’m a Big Fat Phoney (But It’s O.K.) - Cordelia Calls It Quits

Who Am I Anyway? - Enter:Adulthood

Can Happiness at Work Make You More Successful? [Infographic] - Come Recommended

4 Lifestyle Patterns of Entrepreneurs – Young Entrepreneur

Work Motivation in Just 12 Steps – Life Optimizer

Image via wintersoul1

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