Youre probably familiar with Murphys Law: Whatever can go wrong, will go wrong. It rears its ugly head when we least expect it. Thats probably why its called a law, not a theory. When it comes to personal finances, old Murphy really seems to know when to pile it on. Unexpected expenses and changes in your financial outlook are not a matter of if, but when. But all is not lost however, with a little prior planning, you can be prepared for when Murphy comes knocking.
Its a great idea to always have a backup plan, especially when it comes to finances. When times of crisis hit, youll need an emergency fund to fall back on. Some cash set aside to deal with lifes little (or big) detours.
How Much?
That depends, really. What kind of lifestyle do you lead and how much will it costs to maintain that lifestyle if youre out of work? Most experts recommend you save a minimum of three months worth of basic expenses. Figure out your monthly budget (you do have a budget, dont you?), subtract expenses you can live without, then multiply it by the amount of time you think youll need the fund to rely on.
Keep in mind, three months contingency money should be an...
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