My modest emergency fund goal will be to save an amount equal to three months' salary. Six months' worth might be smarter, but three months' worth is a more modest initial goal, and you have to start somewhere! Here is my plan:
- Reduce my 401(k) contributions to 4%, freeing up funds for my emergency fund while ensuring that I still receive the 4% company match. (Free money is free money!)
- Make minimum payments on all credit accounts (credit cards, mortgage, and student loans). While the official financial advice is usually to prioritize high-interest credit accounts, temporarily prioritizing an emergency fund is better for my long-term stability and financial peace of mind.
- Set up automatic deposits for a portion of my paycheck to go straight into my emergency fund savings account. Automatic deposits/contributions are the hallmark of any good financial system. Automating your finances makes your life easier and reduces your chances of deviating from your plan.