4
2008
A (Non)Plan And A Baby Sept To Get Out Of Debt - My Emergency Fund
As of right now, I have very little of a plan. I think the only approach for me to take at the moment is creating a more solid plan as I learn. There are so many resources online that I think I can learn from and so many bloggers that I admire that I think can point me in the right direction.
I just finished Dave Ramsey’s “Total Money Makeover”. I don’t really like his tone but he has a lot of good tips and I can see how a lot of people could have made his method work. I have also completed the first “Rich Dad Poor Dad” book too. Both have some very conflicting views toward debt and wealth but I think both would agree that my first step is to create an emergency fund for myself…
So my plan for this week is to go out and sell some of my no longer needed possessions either on ebay or in the local classifieds to get my emergency fund together.
I think my emergency fund should be €3075 for now. I have been reading a lot of information about what this value should be. Dave Ramsey suggests 1000. I agree a little more with GlblGuy Who suggests that it might be different for everyone.
For me it “feels” like 3 months living expenses (less loan repayments) should be my goal. It will mean some serious cutbacks or sacrifice but I believe I am very dedicated. Wisebread suggests here. That it should be the amount of time it takes to find a new job. I believe I could find a new job easily within 3 months so I am hoping this is achievable.
I will also be looking into what the best option for the proper account to save my emergancy fund in. I will keep you posted on what I find. Does anyone have any links or resources on how to best approach this? I would be very appreciative of you could post some links or get in touch.
An emergency fund is a wise first step. As you say the size of the Emergency fund is different for everyone. In my case I really don’t need a large one as my income is as close as guaranteed as one can get.
For most individuals I would say 3 month sounds like a good plan. Of course this would change depending on how secure you think your job is.
As for an account type:
This money has to be liquid and stable. That means you can not purchase cds, bonds, stocks, bond funds, stock funds ext. What you have left is money market accounts. A money market count is very similar to a savings account except it earns a little more interest as it invest in very short term securities.
An emergency fund is a great idea. BTW, I did some research on Rich Dad, Poor Dad a while back and determined that the guy is most likely not telling the truth. Some researchers looked into finding the identity of his “rich” dad, and they were unable to do so. He should just be able to give up the name, right? I read the book too, and even if he fabricated it, there is still a positive message.
Thanks “How To Invest” for the advice! I actually opened a mutual fund account online which I am starting to think was a silly idea as I have absolutely no idea what I’m doing. Money market account…. even the name of it scares me!
I think just a normal “plain jane” savings account will do the trick at this stage.