Here’s Exactly How Much You Should Have Saved in an Emergency Fund
As a millennial herself, Erin Lowry knows the trials and tribulations of figuring out your finances in a world where student debt is the norm and homeownership is a far-off dream. She also knows how critical an emergency fund is to your financial well-being.
Lowry is the author of “Broke Millennial: Stop Scraping By and Get Your Financial Life Together,” which was named one of the best money books of 2017 by MarketWatch, thanks to its refreshing and conversational style. She is currently working on her second book, “Broke Millennial Takes On Investing: A Beginner’s Guide to Leveling-Up Your Money,” which focuses on helping first-time investors grow their wealth.
Click to find out how Lowry saved up — and how you can grow your savings, too.
What is your money mantra?
You control money or money controls you.
Before achieving financial success, what was your biggest obstacle? How did you overcome it?
I hated, and still don’t love, math. At a young age, I confused being good at math with being good with money. Even though I was a saver with a love of delayed gratification, I didn’t trust myself to go into business or finance. I figured it was out of my league and that I could only handle my basic budgeting.
What is a good rule of thumb for how much of your income should be used for reducing debt versus put into savings?
You should build an emergency savings fund regardless of your debt burden. Otherwise, when the inevitable emergency arises, it will have to get financed with credit cards. You need to at least make your minimum payments on all your debts and then put some towards emergency savings and any towards an employer-matched retirement plan so you can at least get the match. Once you’ve built your emergency savings to between $1,000 to $1,500, then you can redirect your focus towards putting more money towards your debt. You can also focus on ways to be earning more money during this time period in order to pad your savings or pay down debt more aggressively.
What advice would you give your younger self about money?
Start contributing to a Roth IRA with that taxable income you’re earning. I do wish I’d started investing earlier with something as simple as Roth IRA in college.
What is the best piece of advice you received along your financial journey?
My mom once told me that everything I owned should fit in the back of a van. She meant it specifically for my early career years when I was moving to New York City and unsure of where my life would lead, but it sure kept me from wasting my money and accumulating a bunch of cheap furniture and other junk I didn’t need.
Click to learn more about Lowry’s story and her blog, Broke Millenial.
What is the best thing you did to begin building your savings from a young age?
I set specific, actionable goals. Even as a little kid, I would determine what I wanted to buy and then do the math on how much it would cost and how long it would take me to get there at my current earning rate.
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This article originally appeared on GOBankingRates.com: Here’s Exactly How Much You Should Have Saved in an Emergency Fund
