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.

I think this is what we are all aiming for in ourselves and for our children. We want to encourage them to develop good habits and traits and to be good people. When we give, we learn to be selfless and aware of other people. When we manage our money responsibly, we learn self-confidence and independence. 

God makes this promise to us about paying our tithing in the Old Testament.

Have you heard of Dave Ramsey? I love him. He had a real estate portfolio worth $4 million by the age of 26 but ended up losing it all by age 30. He’s since rebuilt his financial life, and teaches thousands of people how to successfully manage their personal finances on his radio talk show The Dave Ramsey Show.

My father-in-law gave all the girls in our family Financial Peace for Mother's Day. In his book, Dave outlines 7 "baby steps" to achieving financial peace. My favorite baby step is #2 The Debt Snowball. This is a great plan to help you visualize what you need and can do to get out of debt and do it quick. It's also called The Debt Elimination Calendar and the Church of Jesus Christ of Latter-day Saints has a great example in their pamphlet called One for the Money which my husband and I read together before we got married. It is an awesome free resource and full of good advice. You can download it here.

The Debt Snowball will help you reduce and eliminate your debt fast by applying the same amount of money each month to your debts even after some of them start getting paid off. To illustrate, list the names of the months down the left side of a columned paper. (I would recommend creating your Debt Snowball table in an Excel spreadsheet.) On the top of the next column, type the name of your debt with the smallest balance and the monthly payment underneath it on successive rows until it would be paid off. Next continue organizing your debts and their payments according to the smallest balance to the highest. Dave says we should start by paying off the one with the smallest balance and not necessarily the highest interest rate first because we will start to see results faster and want to keep with it.

Once your second debt payment gets to the payoff line of your first debt, stop. On the next line below the 2nd payment combine what you were paying towards your 1st debt to the payment of your second and that is your new monthly payment amount for debt #2. Continue with the following debts until they are all repaid. See example below.

You can see that you keep paying the same amount of money towards your debts month after month and that they start to get paid down quicker. I think a problem a lot of people run into is that they will pay off one debt and say to themselves "oh, now that I don't have that debt, I have X amount of extra money to spend a month" and they just spend it one unnecessary things instead of attacking the next debt with it. 

I also love the Debt Snowball because it gives you a clear picture to see that it's possible to get out of debt. It is so easy to get hopeless and feel like you will never see the end of the tunnel but with the Debt Snowball you know exactly how long it will take. 

This is such an easy thing people can do to help themselves learn to manage their money. I think the key word here is manage. Do you manage your money or does it manage you? This is the peace that Dave is talking about. I will be posting more tips and strategies to help you get control of your finances in the future. If there are any topics in particular that you're interested in let me know.