Saving For An Emergency
A great way to get out of debt is to save and pay off your debts. Right? Sounds simple enough. But there is also another step that comes before paying off debts, this is a step that a lot of people do not fully understand and can result in going further into debt.
This is another common principle that a lot of financial experts advise their clients and fan base to pursue. The principle is establishing an emergency fund prior to paying off your personal debts.
For some of us, we went into debt in the first place because there was a form of an emergency that we were not prepared or financially equipped to handle at the moment and the way of handling the financial burden was to use a credit card or take out a no-interest loan that later became impossible to pay off in time.
An emergency fund is a great way to, well, prepare for an emergency. A standard amount that most experts agree on saving is $1,000. Now this is where things can get a little tricky.
We believe that you should work towards establishing this $1,000 emergency fund BEFORE you begin paying off your debts. The logic is simple, if you begin paying off your debts and run into an emergency, you will still not be financially equipped to handle the emergency and will go further into debt.
Despite what your expenses may be or what level your income stands, saving $1,000 into an emergency fund will be enough to handle most issues that may arise in your financial life. Make sure your emergency fund is located in a liquid form. You do not want to have the easiest access to your money, unless you have exceptional self-control, but you also need to insure that you have total access in the event there is an emergency. A savings account is a great example while a CD or stuffing your $1,000 under the mattress may not be the best places to store your money.
Once you have saved the initial $1,000 you can begin paying off your debts little by little.
But the most important aspect to remember is that you are developing a healthier financial intelligence concerning your personal finances. No matter how difficult it may seem to save the $1,000 remember you can literally do anything you put your time, energy, and thoughts to.
Here’s to you saving money and paying off debt!