A Quick Guide To Understanding Your Emergency Fund: How To Start One & When To Tap Into It

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ESSENCE.COM Oct, 08, 2018

Life is filled with the most unpredictable moments—car crashes, job loss and Beyoncé concert tickets, just to name a few. But do you have the financial support to weather those storms? An emergency fund can be a legit lifesaver. It’s recommended that three to six months of monthly income be saved and accessible for those unpredictable financial burdens. Here are six tips to beef up your bank account for those unexpected 911s.

1. Do the math. Map out your monthly income and expenses then calculate how much you should stash in your emergency fund.

2. Out of sight, out of mind. Once you figure out that goal number, create an accessible savings account where you can gain interest and have easy access to your money.

3. Stick to your financial diet. Don’t deviate from your savings plan or dip into your emergency fund unless something major happens.

4. Keep moving up. If you get a raise at work, raise your savings.

5. Get an accountability partner. Rely on them to help keep you on track, and return the favor!

6. Get help from a State Farm® agent. They can help you plan your finances, reach your financial goals and achieve your dreams.

Got it? Good. Now, what is considered major enough to tap into that emergency fund?

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You lost your job. If your direct deposit stops coming, sis, you can certainly rely on your emergency money. Of course, you shouldn’t use it for retail therapy, but instead budget it out for groceries, living costs and other basic necessities. There are two sides to money: the mental side (needs) and the emotional side (wants). Give your emotional side a spending limit.

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Medical emergency. While your health insurance should cover many of these events, sometimes health matters are complicated and unexpected so you don’t have a plan in place financially. Also, if a family member has a medical 911 and you need to travel, it’s okay to withdraw from that account.

Dire home repairs. Look. If your water heater suddenly needs to be replaced, it’s safe to say that you can pull from any money on hand, emergency fund included.

Anything else that’s unexpected, necessary and urgent? If you can answer “yes” to all three of these things, then the situation can be covered with your 911 money.

For more info on how you can begin your journey toward achieving financial wellness, including building an emergency fund, contact your local State Farm agent. Also, be sure to visit LetsStartToday.com for other tips, tricks, and resources on financial wellness.