Start An Emergency Fund - Save 3 To 6 Months Of Earnings

Not too long ago most financial advisers would recommend you saving an emergency fund for yourself of about three months. Lately they've been recommending emergency funds of up to nine months! Of course, these are the same "experts" who never saw this economic train wreck coming.

At any rate, an emergency fund is vital for your well being. Think of it as your own personal bailout. It's meant to provide a cushion for you during a downtime. Imagine your current income being completely stopped and there was no financial aid available. This emergency fund is meant to protect you in that scenario and buy you time to figure out what to do next. Every hours wage you save is a future hours wage you've just purchased for yourself.

I'd aim for a minimum three months of earnings and if you can save even more - all the better. But remember - your savings is constantly being destroyed from inflation and you'll either have to find some savings account with the minimum interest rate equal to inflation or keep adding to this account in order to break even.

This money should be very liquid - that means you can get quick access to it. It shouldn't be tied up in a CD for example. It should be saved somewhere safe - most likely a bank or credit union. And this money should only be used for emergencies - it's not meant to be a savings account for your vacation.

This is a long term goal and may take a while. DO NOT DO ANY OTHER TYPE OF INVESTMENT UNTIL YOU'VE DONE THIS STEP. Investments carry all sorts of risk. You don't want to be risking money that should be going to potentially meeting your basic needs. You invest money understanding there is a risk of loss.

Since this is a long term goal you may want to do some of the short term goals simultaneously. The important point is to create a buffer to lessen the impact of a sudden loss of your income.

By the way - just because certain financial aid is now available is no guarantee it will be available when you need it. There are unemployment benefits currently available, but they are probably nowhere near what you need. This emergency fund will make up the difference. In addition, almost all the states are currently in the red - they don't have money to pay for all these programs. As long as they can keep countries like China convinced to fund us and as long as they can tax us they'll keep money flowing in so for the short term at least these financial aid programs are being funded.

Social Security isn't guaranteed either. Currently the government is borrowing money from the social security fund to pay for other programs - this is going to need to be paid back and it's not clear how that will be accomplished. If foreign countries decide to stop funding our debt then the government may buy it's own debt by printing more money - this is called monetizing debt and would guarantee high inflation - in which case the money you are receiving will be devalued exponentially.

Long Term Goal: Start An Emergency Fund - Save 3 To 6 Months Of Earnings.