Life happens. Cars break down, roofs leak or, even worse, you lose your job. Or, maybe you’re trying to get ahead of the problem—your furnace is on the fritz or that rattle under the hood is a sign of something worse to come—and your saving to make a major purchase. These are all good reasons to have a cash cushion to fall back on, which is not coming from a source of credit.
Have you heard this before? And you’re still not saving?
You’re not alone. Knowing where to start saving for the future isn’t always crystal clear. No worries, we’re here to help you get started building your financial safety net.
Save $1,000 in Emergency Savings
The furnace quits, the car needs repair and school tuition is due next week. Suddenly life’s necessities become an emergency. With an emergency savings fund in place, you can dip in and pay for car repairs without stressing about how your daughter will finish her school year.
Credit cards, auto loans, student loans—don’t those take priority over building your savings?
Yes…and no.
The first route on your road to a brighter financial future should be building emergency savings. Maintaining at least $1,000 balance will cover most minor emergencies (like insurance deductibles or car repairs).
Pay off Your Credit Cards
After you’ve got a head start on saving with at least $1,000 in your emergency account, now is the time to start paying down those credit cards. This should be a priority before other debts because of the high interest rates (meaning your debt will grow faster than other debts). Once credit cards are paid off, you can start working on making a dent in auto and student loans.
Save Three Months of Living Expenses
So, you’ve saved $1,000 in emergency savings and your credit card debt is zero. Now what?
Now it’s time to contribute to your savings even further—enough to survive three months with no income.
This isn’t just preparing for losing your job, but it enables you to take a week off between jobs if you want or enjoy extra time at home with your new baby. Whatever you decide—that’s the key. It’s now your decision because you aren’t forced into actions that your financial situation dictates.
