Many people do not understand the importance of having a savings account with a month or two built up in savings. The reasons most personal finance gurus give are generally sort of cliché and simply common sense. However, the prospect of placing an unexpected car repair on your credit card is not the only reason. Around a year or two ago, gasoline was up in the $3.00-$4.00 range. Most Americans, particularly younger people, had never experienced such a shock to their budgets. Unexpected economic hiccups can severely cramp your style. Our family lives in one of the most spread out cities in America with little or no public transportation. Eliminating driving just isn’t an option. How will you deal with $100.00 more a month in gasoline expenses or the prospect of having your electric or natural gas bill double? The prices of these items are controlled by economic forces that are completely out of our hands.

How do you start an emergency fund if your budget is already tight? The best answer is that you’re going to have to get rid of a bill. Our family did not have cable for two years when my husband and I first got married. We had a budget reception package that cost around $7.00 a month that had 15 channels. You may not know this but most cable providers offer this service as a matter of complying with the law. Most states require monopoly cable providers to offer a reception/budget package to be good citizens. The cable companies almost never advertise the availability of this package. There are many other areas to change that really don’t make much of a difference in your quality of life: reducing the number of times you eat in restaurants, renting DVDs instead of buying them, drinking sodas or coffee, magazine subscriptions, and on and on.  These don’t have to be things that you eliminate forever. Eliminate something for a year and save $1,500 for an emergency fund. You won’t be sorry. You’ll put yourself in the position of not having to pay interest to a credit card company and you’ll learn something about yourself as well.

This entry was posted on Monday, October 19th, 2009 at 2:14 pm and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.