A Step-by-Step Guide to Building an Emergency Fund

Having an emergency fund in place during times of economic slow down might seem like a luxury. It you don't have one, now's a good time to start. Trent, of the personal finance blog The Simple Dollar, has provided a very good step-by-step plan to get you on track and start socking away for that emergency. Outlined as follows:

Why An Emergency Fund?
The first step along the way is to understand what an emergency fund actually is. An emergency fund is cash that you’ve saved up for the sole purpose of helping you maintain your normal life through the emergencies that life hands you.

Set Your Initial Target Low
So, what’s the first step? Many people bite off a gigantic goal for their emergency fund right off the bat and then find that it’s very hard to get there.

Find Your Breathing Room

Make It Automatic (from Marshall, the most important step)
So, you’ve trimmed $50 a week from your spending, but now you have this cash sitting there and it’s tempting to spend it on something more exciting than an emergency fund. You’re tempted…

Set Reasonable Milestones Along the Way
In a few months, you’ll hit that first milestone - and it’ll feel good.

Read the full version here. The Simple Dollar is a great resource. Visit often or subscribe to the RSS feed.

Is this easier said than done? Be conscious of your spending and eliminate what's not necessary. Spend less than you make and save the rest.