Step Five to getting Rid of Debt

Welcome to part five of my Getting Rid of Debt series. My fifth step was to set up my Emergency Fund .

I thought it would make it a little bit more fun to name my fund so I called it my Never Go Back to Fresno Fund ….even though I have never been to Fresno.

Now many people talk about an emergency fund and they put all kinds of restrictions on the fund. They talk about having your emergency fund set at a minimum of $1000 or even being equal to three months of living expenses . Some bloggers even go so far as to say that your fund should be six months of expenses .

I do not agree totally with having those figures as your goal because in some cases it can be very daunting. If I had to set my emergency fund goal as being six months of my living expenses I would never get started because that would seem too difficult, based on my current income and the high level of my expenses.

I did not have much money to be setting up a large fund so I started off really small. I was putting $2 a month into my online savings account per month. There were some months when I could not even put that much in because my expenses were so high. The thing that I thought was important was the fact that I was putting money in savings…..not how much I was putting in each time .

Little by little I was able to grow the savings in my emergency fund and it was extremely gratifying when I could use it for what I deemed as my emergency at the time.

I think that another thing which makes new savers nervous about the ‘emergency fund’ is the terminology used. Most bloggers tell you that you can only use the money for a specific type of situation that qualifies as an emergency under ‘their’ definition. While I did get a lot of negativity for using my emergency fund to pay off a loan , I did receive some support from some of the regular readers.

I think that when building up your emergency fund one of the most important parts is to simply build the mind set of getting a savings goal going. Then you can focus on the dollar amount you want to get up to or the number of months you want to be prepared for. Everything else will fall into place once you get into the habit.

Please take the time to read Step One to Getting Rid of Debt , Step Two to Getting Rid of Debt , Step Three to Getting Rid of Debt and Step Four to Getting Rid of Debt .

Related Posts

• Step Three to getting Rid of Debt
• My never go back to Fresno fund
• Dave Ramsey’s Baby Steps: My Take
• Three Principles Of Personal Finance
• Pay off a loan or put money in savings?

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