Living Without Credit – Creating an Emergency Fund

01 Dec Living Without Credit – Creating an Emergency Fund

With credit becoming harder to obtain, now is a great time to learn to live without credit.  This is the third post in a series intended to discuss how to use non-credit solutions for your household needs.

Building an emergency fund is a better way to survive the tough times than relying on credit cards.  Here are five simple steps to help you build an emergency fund:

Chart your expenses – Calculate how much you need to save by figuring out how much you spend every month.  Go over your past three months of expenses to get a good average of your monthly expenses.
Measure your need – Generally, you should plan on having three to six months of living expenses saved in your fund.  The time period you should have saved depends on how stable your income is–in good times, saving three months of expenses should be enough.  In bad or uncertain times, you may want to shoot for saving a year’s worth of expenses.
Find a place for it – Keep your emergency fund money in a no-risk account and make sure you have access to it without penalty at all times.
Build it up – Make monthly payments into your emergency fund account as if it is a monthly bill you are required to pay. offers 22 suggestions for building up your emergency fund.

Watch it grow! After the fund is built, take a look at it about once every year.  Make adjustments to the amount you are saving if a new life event has increased your monthly spending.  Do not use the fund for anything other than necessary expenses.

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