“Pay off your debt.” “Max out your IRA.” “Buy a house.” “Get a new job.” Personal finance advisers bombard us with a litany of things we ought to do in order to achieve financial independence. It’s overwhelming. Where’s a person to start?
Most personal finance books agree: The first thing you should do — after meeting basic needs, and while reducing spending — is to start an emergency fund.
What is an emergency fund?
An emergency fund is an easily accessible stash of money for use only in case of emergency. It is not to be used to buy a new car. It is not to be used to buy a new PlayStation. It is not to be used to remodel your bathroom. It is for use only in case of emergency.
Why do you need an emergency fund?
It may seem like a silly question, but some really do want to understand why they need an emergency fund. Here are some real-life emergencies that have happened recently to people I know:
