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Set Goals & Budget Protecting the Budget Establish an emergency reserve When you create a budget, you are accounting for every expenditure during a month or year. However, the first thing that ruins even the best laid plans is an emergency or an unexpected expense (such as an auto repair). So it's essential to your financial health to establish an emergency reserve. Financial experts generally recommend that the emergency fund be equal to between three to six months' spending money. Having an adequate emergency reserve allows you to: Deal with inevitable, unexpected expenses by minimizing disruption and avoiding having to go into debt. Take greater risks with the rest of your assets. As a general rule, park your emergency money where you can get at it easily and without penalty. See the Investment Types Course for more information. Tips for establishing an emergency reserve Shop around to find a money-market or savings account with a relatively high yield. Have a little money deducted from each paycheck or transferred from your checking account each month into your emergency account. Use an equity line of credit against your home as your emergency source so that your emergency money is not sitting in a lower yielding liquid account. Do I have enough in my emergency reserve fund? See the Financial Overview Quick Report. < PREVIOUS NEXT > #38599