Debt-Free Forever by Gail Vaz-Oxlade (the beginning after the end read novel .TXT) 📕

Go over your budget and look for other places to cut back. Aim to contribute at least $100 a month to your emergency fund. Every six months, find another $10 a month for your emergency fund. Now you’re on your way to financial stability.

STEP 4: FIND THE MONEY FOR YOUR EMERGENCY FUND

Once you’ve started your emergency fund, sticking away your $20, $50, or $100 a pay, you’re on your way. But you can’t pat yourself on the back just yet. Since my rule of thumb is that you need at least six months’ essential emergency expenses set aside, you must find a way to boost your savings to reach your goal in a reasonable period of time.

One of the best ways to establish an emergency fund is with a payroll deduction at work. This is particularly true for all of you people who have no discipline! Employers often offer the option of deducting some money from each of your pays and putting that money in a savings pool of some sort, perhaps a government bond. There. You won’t even miss it since the money never hits your bank account.

GAIL’S TIPS>

Whenever you receive “extra” income—be it a tax refund, a bonus, or an unexpected gift—use half to boost your emergency fund. While it may be tempting to blow the extra on a treat, don’t do it. Let your unexpected windfall help you build a firm financial foundation so you know you can afford to deal with whatever Life throws at you.

Another way to build up a fund is to reduce what you’re spending in one category of your budget and send that money to your high-interest savings account. Most people have things they can cut back on. Do you buy coffee every day on the way to work? Do you smoke? Do you pick up the latest magazine at the checkout counter? Do you subscribe to premium cable? Do you go out for a drink with your friends after work? Buy your lunch at work? Pick up your favorite Stuff whenever it’s on sale even though you already have 30 pairs of shoes, white shirts, handbags, DVDs … name your vice here.

GAIL’S TIPS

Your food budget includes all the money you spend on groceries, takeout, and eating out. One way to saving big-time is to cut down on your dining out. Eliminating just one meal out for a family of four could save you between $60 and $80 a week. Transfer that money directly to your emergency fund and you’ll be saving $240 to $320 a month, or $3,120 to $4,160 a year.

One great tip I picked up from a regular visitor to my website is the Tit-for-Tat approach to savings. Each time this woman buys herself something she considers a want (as opposed to a need), she contributes an equal amount to her savings account. Not only does it make her really think about whether she’s going to spend the money—because in essence whatever she buys is going to cost her cash flow twice as much—but she’s saving for the future while she enjoys her self-indulgences.

Assuming you’ve been working like a dog to get your debt paid off, once it is, don’t just incorporate all that money back into your spending plan. Take 30% and use it to boost your emergency fund. (If you’ve already hit your emergency fund goal, use that 30% for long-term savings.)

STEP 5: TREAT YOUR EMERGENCY FUND AS SACRED

A real emergency is something that threatens your survival. If you pull the money out every time you create a stupid emergency—gee, honey, we really do need a new front door—then you’re playing a game with yourself, and you will lose! If you think you don’t have the discipline to leave the money alone, when you set up your automatic deductions, do it at a faraway location and freeze the bank card that goes with the account so you can’t dip into the account each time you have a spa emergency.

CHIPPING AWAY ONE EXPENSE AT A TIME

Even with a clear set of instructions like the five steps I’ve just given you, it can be overwhelming coming up with a huge dollar amount when you look at it as a huge dollar amount. It can be so overwhelming, in fact, that you just don’t bother.

No matter how often I say, “Don’t worry, just start saving … even $50 a month gets you closer to your goal,” people still resist because the idea of accumulating thousands of dollars is so alien to them they think it’s impossible. So here’s another idea for getting your emergency fund together that you may find less intimidating.

List each category of expense you would have to keep covered if you hit an emergency. Your categories may include rent or mortgage payments, food, medical costs, insurance, child care, car payments, gas, and whatever else can’t go unpaid.

Go back over your list and cut out anything you’ve kept that’s not absolutely essential. Let’s face it, if you’ve just gone from two incomes to one, you can give up your cable, cell phone, entertainment, and everything else you wouldn’t die without, at least in the short-term. Your essential emergency expenses should cover the necessities of life.

Now write down the average monthly amount for each of your essential emergency expenses and put six check boxes beside the amount. So your list might look like this:

Pick the first expense you want to have covered. Most people pick either the roof over their heads or the food in their bellies. Let’s go with food for our example, and say you need a minimum of $400 for food each month.

How much can you save every month: $10? $25? $100? Whatever it is, automatically transfer the amount you’ve designated from your regular account to your emergency expenses account every month. In our example, we’ll say you can save $50 a month.

First you’re going to save one month’s worth of food expenses. So