Feb. 5, 2019
There's something we can all learn from the government shutdown – the importance of having emergency savings.
Financial experts say your goal is to have enough money in your rainy-day fund to handle expenses for three to six months, if you didn't get a paycheck.
Admittedly, that's not easy for most people, but it's necessary.
"It's critically important for those who are walking a financial tightrope to be prepared for the inevitable, whether it's an emergency car repair, something health-related or as in this case, a loss of income," said Mark Hamrick, chief economic analyst at Bankrate.com.
So, how to you start? You make a family budget to track where the money is going.
Kimberly Palmer, personal finance expert with NerdWallet, recommends using the 50/30/20 rule.
"Basically, 50 percent of your take home pay is going toward your needs, like housing and food," she said. "You have 30 percent of your take home pay going toward costs that are wants, things like eating out. And then 20 percent is going toward savings and debt payments. And that's so you can really build up your emergency savings fund."
If you can't find money in your budget for savings, you'll need to make some hard choices and reduce those expenses.
Another recommendation: Put your savings on autopilot. Open a savings account and make it your designated rainy-day fund. This is money you won't touch unless there is some sort of emergency expense.
Pick an amount that you can afford to pull out of each paycheck, and have it automatically deposited into that account. Your employer can probably help you with this.
It doesn't need to be a lot of money at first, the key is to get started. Save just $40 from every bi-weekly paycheck and in a year, you'll have more than $1,000 in your emergency fund, not counting interest.