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How to Prepare an Emergency Fund

Experts recommend having three to six months of living expenses squirreled away for a crisis -- twice that amount in a bad economy! Find the cash for it with these steps.


  • Step 1: Boost your take-home pay Increase your take-home pay by reducing or temporarily suspending your 401K contributions and any other voluntary paycheck deductions. If you usually get a tax refund, ask your employer to reduce the taxes taken out of your paycheck. Resume your 401K contributions as soon as you can.
  • Step 2: Increase deductibles Lower insurance costs by increasing the deductible -- the amount you pay out of pocket before your insurance kicks in. Higher deductibles mean lower monthly premiums.
  • Step 3: Sell what you don't need Sell possessions you can live without on eBay, through online classified ads such as Craigslist, or at a yard sale.
  • Step 4: Open a savings account Put the proceeds of your cash-generating measures into the highest-yielding interest account you can find that does not penalize you for early withdrawal.
  • TIP: Online savings banks usually offer the best rates.
  • Step 5: Divert money into savings Set up an automatic deduction from your paycheck that goes directly into your savings account.
  • Step 6: Earn more Earn some extra money with part-time work. Maybe a local merchant could use an extra pair of hands over a holiday. Or perhaps there's a resort area nearby that hires part-time seasonal help. Babysitting and yard work are also effective standbys.
  • Step 7: Hands off! Keep your hands off the money unless you have a true emergency.
  • FACT: After saving for 34 years, retiree Eugene Sukie cashed in 28,000 rolls of pennies for $14,000.

You Will Need

  • Cash
  • Savings account
  • Automatic deposits
  • Discipline

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