I believe one of the most alarming trends in the US today is that so many people tend to live from paycheck to paycheck. Our culture apparently see this as normal behavior - that whole “Keeping Up With the Jones’” mentality seems to be the norm for many people.

If you don’t believe me, try searching “how much Americans have in their savings accounts” in your favorite search engine. You’ll see that the majority of Americans have less than $1,000 in savings. Some studies will estimate 58% — others will estimate 69% — regardless of which study you believe, we can conclude that the hypothetical Jones’ everyone is trying to keep up with are practically broke.

I’m not judging! Early in my life, I did this too. I remember when Glenda and I were first married, our washing machine failed. We didn’t have an emergency fund at the time - at least it wasn’t big enough to buy a new washer! We did the same as most of our friends did at the time, we bought a shiny new washer on credit, and paid it off over a few years. When that feels normal, it’s not very painful. However, having a fully funded emergency fund really changes your perspective.

What if you had 3-6 months worth of expenses in your money market account, ready to access whenever you need it? I can tell you for sure that if we had this sort of emergency fund in place back when that original washer failed, we would have paid cash for a replacement, and saved a lot of money and a bit of emotional stress as well. Even an initial $1,000 emergency fund would have saved us from this situation!

Here’s how I normally approach planning for an emergency fund. The first step is to get $1,000 set aside in a separate savings account, so that you know it is there and available for unplanned emergencies. Remember, this is not saving for Christmas shopping or vacations! This account needs to be earmarked specifically for emergencies - meaning that you don’t access these funds for anything unless it is unplanned and it’s a real emergency. If you’re married, both spouses must be in agreement on this in order for it to work.

Once you have this initial $1,000 set aside, you will be amazed at the feeling of peace that you begin to experience! Most people I work with tell me that completing this first step directly leads to improved sleep! How are you sleeping these days? If you don’t have this starter emergency fund set aside yet, let me encourage you to get started today!

Once the starter emergency fund is complete, then we start working toward building up a fully funded emergency fund. What I mean by this is setting aside 3-6 months of basic living expenses in the emergency fund. I like to have all debt other than the primary residence paid off or eliminated before focusing on this second-stage emergency fund area. But when you build your savings to this level, it changes so much!

So many people have found themselves laid off or unemployed recently. That’s tragic, no matter your financial situation. But consider the peace of mind you would experience if you had built up an emergency fund like this before the stressful times come. What if you’re in a job you don’t like - would having a fully funded emergency fund free you up to take a chance and go find the job of your dreams?

When you look at your current financial situation, this may seem a long ways off. I can tell you from experience, this is work that can be done. It’s not easy, and it requires that we deal with our money differently than most people. But it can be done! Improve your peace of mind - start saving for emergencies today!