Now, if you’ve taken my advice and set up your mint account it will be child’s play to draft your first budget. I recommend pulling out your last few months of debit card and credit card statements and averaging out how much you spent in each category monthly. These categories include items like utilities, groceries, car insurance, cell phone, mortgage, car loan etc. Hopefully once you have listed all your expenses it adds up to less than your income. The amount left over should immediately go into a money market account to begin your $1000 emergency fund.
I think a money market account is the best place to house your emergency fund because it grows your savings with a small interest rate and it is easily accessible. My husband and I have our money market account through Sallie Mae. We can withdraw funds up to six times per month and earn 1.05% interest on our balance. It is also easy to transfer funds from our checking account to the money market account. Why start your journey to debt free living with an emergency fund?
Murphy, the little devil that shows up to wreak havoc on your good intentions. You’re paying off small debts left and right and then bam, your tire blows or your timing belt breaks or you have an unexpected mini disaster. If you’re prepared with an emergency fund, you won’t have to rack up more debt on your credit card. You’ll be able to escape the vicious cycle. Murphy’s law: If it can go wrong, it will go wrong. But a $1000 will usually get you out of the worst of anything murphy brings your way.
Summary: Step one, write out your budget plan somewhere you will see it frequently. Step two, open a money market account and stock it with $1000 as quick as you can. Step three, get to that debt snow ball.