Uses of the Emergency Fund
Posted By: Dr. Frugal in Budget on 08/21/2007 at 07:57:47
Your emergency fund covers a certain number of months' worth of essential expenses for you and your family. What are those essential expenses· Think of them as what you need to pay to keep a roof over your head, food on the table, your children in school, your insurance up-to-date, and your car running. Remember, you have lost all or a substantial part of your income, so you can out everything that does not fall into these critical categories. Your emergency fund should cover:
·: Mortgage/Rent
·: Taxes
·: Loan Repayment
·: Utilities
·: Insurance
·: Basic Telephone
·: Groceries
·: Auto Expenses
·: School Expenses
·: Medical Expenses
If you are in an emergency situation, your most precious resource is cash. You should do everything you can to avoid spending money on nonessentials and make your emergency fund last as long as you can. This means canceling cable, newspaper subscriptions, Starbucks, and any other expense that drains cash but doesn't directly contribute to your nonessential expenses.
Take the numbers from your budget for each item and arrive at a monthly total for your essential expenses. This will give you an idea for calculating how much money you will need in your emergency fund.
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