Ask Away...: How Much of Your Paycheck Should You Set Aside for Emergencies?

Monday, September 22, 2014

How Much of Your Paycheck Should You Set Aside for Emergencies?



This is a question I hear a lot when it comes to money so I figured I may as well give my input.





It happens to everyone.... you're going about your business and something completely out of the ordinary happens.  Whether it's on a large scale like a serious injury, or on a smaller scale like a flat tire, the most stressful part about it is that we aren't prepared for the financial repurcussions. 



So when it comes to how much money you should put aside for emergencies from every paycheck, it's wise to always allocate some money for each emergency category.



My emergency categories are:
Home

Car
Vet
Medical



Home is for anything that could go wrong around the house like a pipe leak.   Car is for anything from inspection to getting a windshield replaced or a tire patched up.   The Vet category is for any kind of vet expense for my 4 dogs be it an emergency or just a check up because one of them has a cough.  And Medical is for me, and to cover prescription medicines.  This comes in handy when I am sick and I have to get to the doctor because I have money set aside for my copay and any medications they prescribe me. 



So make a list of the things that have happened to you or to those around you. 



If you have children, make sure there's a kids fund for medical needs.   And then after you do your budget, and you are setting up your cash envelope system, make sure you breakdown your income and allocate a little bit from each paycheck to go towards each category.  It's easier to do this then to take large chunks all at once, at least for me.  I still put money aside in my emergency savings fund, but I won't have to tape into that when I have money in my other envelope categories too. 



You would be surprised how much the $20 a paycheck in my car fund adds up.  If I go 2 months without any car troubles, I already have almost $100.  That's enough for a tire if I need a new one because mine gets a nail in it.   That's also enough to cover the out of pocket expense to get my windshield replaced.  I know from experience!




What categories will you put money aside for?




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