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Build an emergency fund into your budget, and as the years go by, make sure you increase the amount
you put in it. The simple rationale for this is that something will go wrong and you’d better have the
funds to pay for it. In addition, something may go right and you’ll need to have the funds to be able to
enjoy it.
Let’s first talk about the good. What if you make a new friend at work, and he invites you to his
wedding on the other side of the country? You’re going to want to go to it. That means you need
money for airfare, hotel, a gift, and other things. This trip was unplanned at the beginning of the year,
so you’d better have an emergency fund that can fund this expense.
On the bad side, what if your car gets hit and insurance covers all but $500 of it? You will need to
find that $500 or you won’t be able to get to work. As you will learn in the debt and credit card
lesson, you don’t want to charge this expense on your credit card. It would cost you significantly more
to pay it back using your credit card. Your best bet is to have your emergency fund take care of it.
The most common unexpected expenses are automobile, medical, prescription, home
maintenance/repair, and veterinary (please don’t buy a pet until you can afford one). I’m sure you can
think of some other unplanned expenses that may affect you.
Early in adulthood, it’s difficult to have a large emergency fund. Make sure you budget for one and
increase it as you get older. Doing so will save you headaches, stress, — and money.

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