How I did it: I read about the Emergency Fund idea from a few personal finance blogs and googled the "founder" Dave Ramsey. It makes sense to put money away for rainy days, emergencies and unexpected bills. The big motivation for me was owning a car. $1000 is my insurance excess should I need it (touch wood). I didn't want to have to take out a personal loan or borrow money from my family who has their own financial problems.

I started out by saving $50 a pay cheque and then if I had any left over money, I would put that through as well. If I didn't have any leftover, at least I'd saved $50. I've dipped into it a few times so this goal would have been completed a while ago.

Ideally you shouldn't dip into it AT ALL unless an emergency happens. I read somewhere that it could also be called an "Opportunity Fund". It enables you to do things you otherwise couldn't. A community course or lessons in something you've always wanted to try for example. As long as you aren't dipping into it for happy hour with work friends and new shoes.

I dipped into mine for a new-to-me computer that I'd been looking for. It set me back about $200. So much better than the $600 I was looking at originally. I also used it to buy a few extra Christmas presents for my Mum. I'd already bought her things and then saw them on sale. They really were a bargain! Another $40. Using it as back-up money is perfectly fine so long as you replace the money and then some, next pay day.

I feel secure because now I don't need to worry about emergencies. For families, the $1000 might not be enough but for a single person or a couple, $1000 is perfectly fine. Best of luck on your saving journey!

Lessons & tips:

• Do not dip into it for frivolous reasons such as Happy Hour or new shoes. Only emergencies and opportunities that come your way.
• If things are tight, don't forget about your fund. Funnel a little money in even if it is just $5 or the spare change in your piggy bank.

Resources: The following blogs are my favourite for personal finance. Give them a google!

• Frugal Dad (Blog)
• Getting Rich Slowly (Blog)
• Dave Ramsey (Website)
• Money Monk (Blog)

Dec 23, 2010, 06:28PM PST | 1 comment | 11 cheers