Third, Build Your Emergency Savings

The third step in getting your financial house in order is to build your emergency savings. This is your safety cushion, the money that will stand between you and the things that can go wrong. You can call on your emergency savings if your car’s transmission goes on the fritz or if you get sick. It is there so you always have a cushion in your account, so you never, ever have to pay another bounced check fee. It is the ultimate “sleep tight” insurance, since it gives you the confidence that you can handle whatever life throws your way. 

Having money in emergency savings is the guarantee that you won’t have to slip back into debt. This is how you make sure that the little things that go wrong in life are just that—little. 

You can manage life’s bumps and bruises without raiding your retirement account or relying too much on your credit cards. The goal is to build a nice, comfortable bank balance—enough money so you can be really and truly confident about your money. Aim to save about three months pay. You don’t need anything fancy, just an ordinary savings account you can tap whenever you need it. This is the money that lets you rest easy, because you know you will be able to handle pretty much anything life throws your way.