This babystep is fairly straight forward. You want to pile up cash for 3-6 months worth of expenses. Remember, this is an emergency fund so you only need to count your necessary expenses. Utilities, Food, Mortgage etc. You probably wouldn't be worried about paying for cable if you were in a tight enough situation that you were using this fund.

Keep this money were it is liquid or very accessible. That means a money market or bank accounts. Do not use this money for investing. This money needs to be there when you need it.

There are a few factors to consider when deciding whether to do save 6 months of expenses instead of 3. 

• Are you self-employed? (lean towards 6 months)
• Is your income irregular? (lean towards 6 months)
• How is the current job market? Right now with unemployment so high I would rather 6 months of expenses covered in case of job loss.
• How is the economy in general? Does it seem stable? ie inflation vs. deflation, short food supply
• What are some of the political plans being talked about? ie raising taxes, stimulus plans

How are you feeling about the outlook of the economy right now? How many months are you going to aim for?

How many times have we been counseled to have a "rainy day fund'? How many of us have done it? An emergency fund is just that. For emergencies. Unplanned expenses come up all the time. It doesn't have to be a huge event like losing your job but it can be. Most likely it's something smaller but big enough to not fit into your planned budget. 

I think this is one thing that is so easy to put off but also one of the easiest things to complete once you get started. It's not overwhelming and time intensive like saving and planning for retirement or paying off your house. 

Yesterday while I was driving, I pulled up to a stop light and my power steering went out. Just like that, no warning whatsoever. So today my car is in the shop getting fixed and you can bet that there is going to be a hefty bill to come back with it. Now, I don't like spending money or seeing my savings account go down but I can't tell you how nice it is to not have to worry about where this money is coming from. I can't imagine the stress that I would be feeling if my husband and I were living paycheck to paycheck and didn't have an emergency fund in place. 

In the book Financial Peace Revisited, Dave Ramsey lists 7 baby-steps to follow in order to gain financial peace. The first baby-step is to build an emergency fund of 1000 dollars. That may sound stressful but you would be surprised at how quickly that will add up when you save a little here and a little there. And seeing your account balance go up will start to motivate you even further to be creative in finding ways to save more and more.

Let this be the year we control our finances! Good luck building or replenishing your emergency fund as you need it.

I've listed some financial resources below but what are some creative ways you've found to save when you needed to build up a cash reserve?

Resources: 

One for the Money by Elder Marvin J. Ashton of the Church of Jesus Christ of Latter-Day Saints. 

This is an awesome and short read about family finances. If you haven't read it yet, you should. You can get a pamphlet or download it for free here.

I love this book and can't say enough good about it. Dave Ramsey rocks! 

He's lived through it all and walks you through everything you can think of on the road to financial peace. Whether it's piles of debt, dealing with creditors or bankruptcy or just getting a plan, he has solutions for them all. Check it out from your local library if you need to. His website has some great tips and information too.