Life is all about the unexpected. It’s why we plan to ensure that contingencies are covered and risks are reduced. Most people don’t plan to lose their job or become disabled, but nearly one in five workers today will experience one or the other. That is why any financial planner will tell you that, at a minimum, you should have set aside twelve months of living expenses as savings. That may seem to be a tall order for the 60% of Americans who live paycheck to paycheck, But, maybe that where you should start by seeing if you get by without using one of your paychecks. By simply slipping it into your savings account and working off of what you have in your checking account and cash on hand, you will learn two very important things: 1) How tightly you can budget your expenditures, and 2) how long you can go without a paycheck.
If you find that you can do without a paycheck for one month, then maybe you can do without one every other month, or more. With that as a goal, you could be well on your way to putting yourself in a much more secure financial position when the unexpected occurs. At the very least, you should commit at least $500 per month towards your emergency fund and then budget around that commitment.