An Emergency Fund: Your First Line Of Defense

Written by David Berky


Continued from page 1

A good rule of thumb for saving is to try to save enough each year to supply you with one month's income. This means you are saving 1/12 or 8.3% of your monthly income.

This will allow you to build your emergency fund by one month every year. After only six years you will have a six-month supply of emergency cash. Then you can continue to extend your "coverage-period" or you can divertrepparttar monthly payment into other savings or investments.

Most people find that "billing" themselves for savings and investments is a good way to put your savings on auto-pilot. If an amount is taken automatically from your bank account each month, it is easier to handle than if you wait untilrepparttar 112689 end ofrepparttar 112690 month and try to save from what you have left over. (How often do you have anything left over?)

So where isrepparttar 112691 best place to keep your emergency fund? Probably not a place where you can have easy access to it - too tempting. Definitely not as cash inrepparttar 112692 cookie jar - too unsafe (and no interest). And probably not in 5 year CDs - too restrictive. You may want to avoid CDs altogether so that you are not charged an early withdrawal penalty when you can least afford it.

Savings accounts are OK, but usually pay very little interest. If a savings account is your choice, open one at a bank that you don't regularly use. Also don't get a checking account to avoidrepparttar 112693 temptation to spend "just a little" bit here and there.

Or look for a money market account that pays a reasonable interest rate. You may want to consider a money market account that only invests in tax-free securities. This way you won't have to worry about paying taxes on your interest.

Then set up an auto-withdrawal from your regular checking account or direct deposit amount from your pay check right into this new account. Adjust your budget to accommodate having less money each month and forget about it.

You can also give your emergency fund a boost now and then by putting "windfall" money into to it. You know "free-money"; birthday gifts, inheritances, insurance settlements, escrow overages, rebates, tax refunds, etc.

Your emergency fund becomes your own financial insurance policy. And if you never use it you will have that much more money to play with when you retire. Or even retire early withrepparttar 112694 extra money you have saved.

© Simple Joe, Inc. David Berky is president of Simple Joe, Inc. One of Simple Joe's best selling products is Simple Joe's Money Tools - a collection of 14 personal finance and investment calculators. This article may be freely distributed so long as the copyright, author's information and an active link (where possible) are included.


The Proper Use Of Credit Cards

Written by David Berky


Continued from page 1

Sometimesrepparttar credit card can lead a person into living a lifestyle that is beyond their means. If a person gets inrepparttar 112688 habit of dining out two to three times a week and these meals are paid for by credit card,repparttar 112689 card balance increases quickly. Oftenrepparttar 112690 additional expense was not planned or budgeted. People can even end up spending more each month thanrepparttar 112691 actually earn.

This can continue as long asrepparttar 112692 credit card balance is belowrepparttar 112693 limit andrepparttar 112694 person makes their regular monthly payments. But as soon asrepparttar 112695 credit limit is reached, many credit companies will increaserepparttar 112696 credit limit and giverepparttar 112697 person more room to get into debt. I have personally seen a credit card limit expanded by $10,000 within three months.

This cycle can continue untilrepparttar 112698 person is required to make a minimum payment that is more than they can afford. Now not only do they have to cut back onrepparttar 112699 lifestyle they have grown accustomed to overrepparttar 112700 years, but they also have to either increase their income or cut out things they enjoyed before increasing their lifestyle with their credit card.

Also what happens ifrepparttar 112701 person is suddenly out of work or has to take a pay cut or lower paying job. That's right,repparttar 112702 credit card bills keep coming. And many people rely onrepparttar 112703 remainder of their credit limit to supplement their income until they are working again or can find a better paying job.

We have seen this cycle in America increase average credit card balances each year and eat uprepparttar 112704 equity in many people's homes. Home equity loans are used as credit cards to live a lifestyle that is beyond people's means. Or to purchase toys they really can't afford to buy let alone keep and use.

Orrepparttar 112705 home equity money is used to "pay off high interest credit card debt" asrepparttar 112706 ads suggest. But then people continuerepparttar 112707 habit of living off their credit cards and get right back into debt again.

So what isrepparttar 112708 answer to America's growing debt problem? Abolish credit cards? Nationally imposed credit limits?

How about a little old fashioned self-discipline? I know is not in style anymore but it is stillrepparttar 112709 best policy.

Bottom line: pay off your credit card balance each month. Don't buy something now and expectrepparttar 112710 big end of year bonus to pay off your credit card. Even if you do get it, you will probably spend it on something else.

Don't fall intorepparttar 112711 habit of living off your credit cards. If you have $1000 of disposable income to spend each month, whether through a credit card or in cash, only spendrepparttar 112712 $1000. Don't try to make up for extra expense this month by assuming you can catch up on your credit card payment next month. It won't happen.

If you have developed bad credit habits, cut up your credit cards, or only keep one for emergencies and resolve to pay offrepparttar 112713 balance each month. Then create a plan to get yourself out of debt and stick to it.

You can relieve stress, avoid family conflicts and sleep better at night knowing that there are no credit card wolves howling at your door.

© Simple Joe, Inc. David Berky is president of Simple Joe, Inc. which sells the Simple Joe's Debt Eraser PC software. Debt Eraser can help anyone get out of debt quickly and inexpensively by creating a Rapid Debt Reduction Plan. This article may be freely distributed as long as the copyright, author's information and an active link (where possible) are included.


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