The Personal Finance Podcast The 1-3-6 Method For Building & Managing Your Emergency Fund
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Aug 7, 2024 Discover the 1-3-6 method for building a robust emergency fund, starting from one month of expenses and growing to six. Learn why a solid emergency fund is crucial for preventing high-interest debt and adapting to life's changes. Explore financial planning tools, including compound interest calculators, to secure your future. Delve into strategies for navigating job loss and determining your unique 'swan number' for financial security. Plus, find out how to maximize your emergency fund to beat inflation!
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Phase One: One Month Expenses
- Build your emergency fund in phases, starting with one month of expenses.
- Focus on this before investing or paying off debt, aiming for a few thousand dollars initially.
Tackle High-Interest Debt
- After saving one month's expenses, aggressively pay off high-interest debt (above 6%).
- Continue small contributions to the emergency fund while tackling debt.
Increase Income
- Increase your income to accelerate emergency fund growth if one month feels impossible.
- Focus on skill development, job changes, or promotions to boost earnings.