Top Ten Personal Finance Mistakes - Part 5

http://www.bankruptcylawnetwork.com/2007/08/03/top-ten-personal-finance-mistakes-part-5/#more-856

Published by Eugene S. Melchionne, Attorney at Law August 3rd, 2007 in Personal Finance, Financial Resources on the Web and Connecticut. Tags: emergency fund, financial ruin, savings plan.

The biggest mistake anyone can make is failing to have an emergency fund. When you don’t have even the smallest amount put aside for an emergency, any unplanned expense can start the ball rolling to financial ruin. Whip out the plastic and pay for the failure to save for the next ten to twenty years.

Some experts (and talk radio hosts) suggest that you start with a small emergency fund of $1,000.00. This sum may not be easy to save, but it is a start. By no means should this be the end of your savings.

With a thousand dollars, pretty much any small emergency can be met without resort to a credit card. Got a flat tire or a doctor bill not covered by insurance? A withdrawal from the emergency fund will cover it. Be sure to recharge the savings though, because emergencies have a habit of re-occurring.

Once you have a small emergency fund, you can start to add to it. Some economists suggest saving about 10% of your income each week. If you save about three to six months of income in your savings plan, then any emergency (even a long illness or unemployment) can be covered. Here is a spreadsheet from the Wall Street Journal that you can download.

Got that savings plan? Continue onto Part 6, Long Term Savings.