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5 critical items for any budget

Emergency fund
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Piggy bank

The ideal: stockpile six months' worth of living expenses (not gross income), to cover a job loss, says Peggy Cabaniss, CFP, president of HC Financial Advisors in Lafayette, Calif., and past national board chair of the National Association of Personal Financial Advisors.

Cabaniss' advice is to make this one a priority, right along with your retirement contributions, until you amass your target amount. Then you can take it off your budget.

One way to avoid the temptation not to save: Have the money automatically transferred on the day your paycheck hits. Keep it where you can get to it on short notice, not tied up with a long-term investment. "This money is honestly meant as a cushion for a rainy day," Cabaniss says. If you want to earn a little interest, consider a short-term bond fund, she says.

The most important thing is to get it out of that checking account. "For most people, what hits that checking account is what gets spent every month," Cabaniss says.


 

 

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