When should you start saving for your emergency fund?

In my previous article I outlined the reasoning behind opening an emergency fund. Not all individuals are in a position to save enough money for their emergency funds however. There are many reasons for that, including if they are already in an emergency.

In order for them to stabilize their financial situation one important equation that has to be followed is to spend less than you earn. By spending I include anything that you spend your paycheck on including car repairs and maintenance, home related expenses such as mortgage, property taxes or rent as well as groceries, clothes etc. I would also not consider saving for an emergency fund before you pay off unsecured lines of credit such as credit cards with double digit interest rates, student loans and possibly car loans as well.

Eliminating as much in monthly debt expenses as possible increases your financial flexibility and requires a smaller amount of money to save for an emergency fund. Once you have repaid most of your debt and you are spending less than what you are earning you should be having a nice stream of funds sitting in your checking account. What you should do is decide the amount of funds to contribute towards your emergency fund and start it. Once you are at this step, check out ways to invest your emergency fund.