More Money Mistakes: Not Having An Emergency Fund

BOSTON (CBS) - For the most part money mistakes are self-inflicted wounds!

According to the Economist, nearly half of American households said they could not cover an unexpected $400 expense without borrowing or selling something!

And according to a study done by FINRA's Investor Education Foundation, nearly 50% of Massachusetts residents have an emergency fund that could last them 3 months.

We currently rank in the top 5 in the nation for financial capability. But still half of our listeners don't have an emergency fund. That's not a good thing.

Everyone needs an emergency fund.  This is money set aside to be used for emergencies. When your income stops coming in or drops, you will need this money to keep paying your mortgage and buy groceries.

This is money to be used when you lose your job, the winds of a hurricane blow the roof off your house or your union calls a strike. You need to plan for the unexpected and having an emergency fund allows you to do just that. I wonder how many folks in the Florida Keys wish they had an emergency fund right now.

The conventional wisdom is to have at least three months' worth of living expenses set aside, and if you can do it, six months' worth stashed away is even better.

Three months of living expenses is not the same as three months of income. What will it take to maintain your lifestyle, rent/mortgage payment, groceries, monthly utilities, childcare, insurance payments etc.? That's the amount you'll need.

If you are single or the sole breadwinner in a family, an emergency fund is extremely important because you don't have the luxury of a second income to cushion some of the emergency. My recommendations are as follows:

• Bare minimum for anyone:                 3 months
• Children & 2 steady incomes:             3-6 months
• Children & 1 steady income:              4-6 months
• Children & no steady income:            6-9 months

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You can hear Dee Lee's expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m. and 3:55 p.m.

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