Cash Resevers Will Protect You
|
|
Once you get bad credit it is very difficult to escape it. It is like a hole that you fall into and can't climb out of. The easiest way to avoid this, of course, is to avoid falling into the hole in the first place. That sounds easy, but how can you do that? Here’s one helpful tip.
You should save the equivalent of three to six months of income for an emergency. That way, no matter what happens, whether you lose your job, get sick, have a family emergency or have to stop working for some reason, you will still be able to pay your bills and maintain your good credit. You will also feel more comfortable and confident knowing that you are protected if something happens.
It is important that you have the discipline to save the money without being tempted to spend it on something you don't really need like clothes or a trip. One good way to avoid the temptation is to keep the money in a bank account which you can't access through an ATM. If you have to make the effort to go to the bank to withdraw the money, you are less likely to spend it on something on a whim.
Now, it seems like a great idea, but many of you are probably asking how you are supposed to get that much money to save. It is simple as long as you remember that you don't have to do it all at once. Slow and steady will win this race. Just set up a special account to start saving your security blanket in. Set it up so that a regular amount of money is deducted from your regular bank account and put into your new account every month. If you have the money taken out of your account right after you get paid you won't even notice it is gone and you won't miss it. As long as the amount you have deducted from your account each month is somewhat significant (say $100, depending upon your income) then you will be surprised how fast your emergency fund grows.
Once you have managed to set aside six months salary you don't need to stop saving for an emergency. You are already in the habit and it never hurts to have more set aside, so you might as well keep saving. A good idea is to keep a month or two of income in an account which is accessible and then place the rest in short to mid-term interest bearing investments like T-Bills, where your money can safely work for you while still being accessible if you need it.
Being ready for a rainy day will allow you (and your credit) to survive it when it comes without getting all wet.
Posted by jonathan on October 26, 2005 at 07:34 PM