| Unexpected expenses sneak up on the best of | | | | Unfortunately money market accounts and other |
| us. Paying these unexpected expenses looks | | | | short-term savings vehicles are not big |
| impossible when you are in debt and barely | | | | moneymakers, but you can access your money |
| making the payments from month to month. If | | | | quickly and do not have the threat that it |
| you're like most, you have to reach for the | | | | will decrease in value. |
| credit card and then find yourself deeper in | | | | |
| debt and farther behind. | | | | The reason that I like money market funds is |
| | | | that they will make a return comparative to |
| What do you do about this? | | | | other accessible investments, most have check |
| | | | writing capabilities, and your investment is |
| The answer for paying unexpected expenses is | | | | safe from downturns in the stock market. |
| an emergency savings account. | | | | |
| | | | There are other options such as interest |
| An emergency savings account is a sum of | | | | bearing checking accounts, savings accounts |
| money set aside in an account that is only | | | | and possibly other savings vehicles in |
| used for paying any unexpected expenses. | | | | various banks, investment institutions and |
| | | | credit unions. Choose the investment that is |
| Unexpected expenses come in many varieties | | | | available to you and fits the criteria. |
| and range from a roof leak to a job layoff. | | | | |
| | | | One thing to be aware of when choosing a |
| There is no hard and fast rule to determine | | | | money market or any investment option is the |
| how much you need in an emergency savings | | | | expenses. Expenses will vary widely among |
| account, only rules of thumb. | | | | investment firms. Ideally you want to find an |
| | | | account that lets you invest in the money |
| If you are still paying off your unsecured | | | | market with no up front or back end fees and |
| debts it is generally accepted that $1,000 is | | | | minimal yearly expenses. Since a money market |
| an appropriate amount until you have become | | | | does not appreciate quickly it would take a |
| "bad debt" free. | | | | long time to make up for high expenses. |
| | | | |
| If you have nothing more than a mortgage | | | | An up front fee is a percentage of your money |
| payment or perhaps are completely debt free | | | | that you have to pay when you initially |
| the common recommendation is that you have 3 | | | | invest it. For example if you invest $1,000 |
| to 6 months living expenses put aside. Now | | | | and the fee is 5%, they will take $50.00 out |
| this is where it gets tricky. Everyone will | | | | of your account and you will only end up with |
| have different requirements for 3 to 6 months | | | | $950 invested. |
| living expenses. The general rule of thumb is | | | | |
| to have at least $10,000 available. | | | | With a back end fee they take a percentage |
| | | | when you withdraw your money. |
| This is just a rule of thumb and you will | | | | |
| have to do some thinking for yourself here. | | | | All investment firms will charge an annual |
| If your mortgage payment is $2,000 each | | | | expense on your invested money. Just pay |
| month, then $10,000 surely will not cut it. | | | | attention and choose one that has a low |
| On the other hand, if you are debt free, | | | | expense. Be careful, since some will lure you |
| $10,000 may be a nice cushion. Once you are | | | | in with a low initial expense that will be |
| living on a monthly budget it will be easy to | | | | raised after a specified number of months. |
| determine how much you will need for your | | | | Look at the track record going back a few |
| emergency fund. Make sure that you do not | | | | years to make sure that the expense ratio has |
| skimp on this account. | | | | stayed consistent. |
| | | | |
| Your emergency savings needs to be readily | | | | Make sure that you have an emergency savings |
| available; money market accounts are usually | | | | account so that paying unexpected expenses |
| the best choice. | | | | does not chase you back in debt; it is a |
| | | | vital step in living without debt. |