Besides eliminating debt, the first thing you need to do for your personal finance is building an emergency fund. This is essential because – as its name says – it prepares your for emergencies. Nobody wants to be in a situation where they need significant amount of money immediately but not having it.
One situation where emergency fund plays an important role is when you are laid off from your job. That’s a situation where you no longer have income to support yourself and your family. If you don’t have an emergency fund, life will be difficult for you and you might need to get into debt. But if you have emergency fund, you will room for breathing. You can use the fund to cover your living costs while looking for a new job. It helps you keep you and your family in good condition until you find a new income source.
So aim to build an emergency fund as soon as possible. Don’t wait until everything is too late. Do it now with whatever amount of income you have. Assign a percentage to it to an account that you set up specifically for the fund. Then avoid the tempation of using fund unless you’re in an emergency. Make the commitment to keep the fund there until you really need it.
Automatic saving plan could work well here since you don’t have to manually assign the money. This way whether you like it or not your fund will automatically be built.