An important piece of your personal budget or personal finances is an Emergency Fund. This is where to keep between 3 – 6 months of easily accessible cash stashed away in a savings account for emergencies!
We all know someone who faced an emergency, and how a lack of cash really disrupted their personal finances and destroyed their personal budget!
But remember, needing to fix a broken transmission on your car is an emergency – attending a sale at H&M this weekend is not and emergency!
Why do we all need an Emergency Fund of 3 – 6 months?
That timeframe gives you enough cushion of cash so you can get back on your feet if something really major happens, like being laid off from work or having a spouse injured or a child become sick and they require major medical attention.
How do you know if your personal Emergency Fund is properly financed? Easy – just use the Emergency Fund Ratio. Simply divide your total current liquid assets over your monthly nondiscretionary expenses. The result should be between 3 – 6. If it not, don’t panic – just keep saving monthly until you make it!
Need other tips on how to save more of your personal finances or how to build a realistic budget in Austin, Texas? Contact Capital Budget Strategies, LLC or check out our website at www.CapitalBudgetStrategies.com
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