Importance of An Emergency Fund

One of the first steps to becoming debt free, or remaining debt free is to start an emergency fund (rainy day fund). The first step is to start saving $1,000. Your emergency fund should be in a liquid account so you are not penalized if you have to use it. It should only be used for real emergencies, car repairs, job loss, etc. Once you get the $1,000 saved and start paying off some of your debt, the next step is to work on saving up 3 to 6 months of living expenses in your emergency account. With the situation the economy is in currently it is more important than ever to have an emergency account. If you have an emergency account then you won't be as likely to put unexpected expenses on your credit cards.