One of the tenets of personal finance, and the simple rule that money books tell you to do, is to pay yourself first. Also, your parents are the first persons to give you this advice.

Unfortunatly, many often people use that money for other purposes. They pay down debt, the phone bill, buy a new laptop. They don’t set aside a portion of their income to save, so when next payday comes along, they haven’t more money.

However, as a result of the economic downturn today, become important to put aside a percentage of your income for yourself.

But, the question now is: What does “pay yourself first” even mean? In brief, It means that you must to save your income before you buy groceries, pay your bills, and so on.

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Once you take the habit, you can open an saving account, can help you grow your potential wealth. Of course, if you’re just getting started to work, there’s no money saved at the end of the month. You’ve paid the rent, groceries and maybe your car.

The real difficulty to developing this habit is finding the money to save. So, here, I listed some tips to get started doing this yourself. They each have their advocates, and can all work.

1. First and foremost you’ve need to establishing saving as a priority. Put your saving first to any else things such as car rent, cell phone, and so on.

2. Creating a mental list of things to pay for first. Usually people using their money, first to pay bills, second to fun, and at the end for saving money. It’s obviously that they remains little in the bank. Having money saved in the bank can be useful for emergencies, or use it to save for retirement.

3. Initially, trying to save just 1% of your income, in order that the entire process is painless, then trying to save 3%. or 5%.

3. Paying yourself is a great way to get freedom and open a world of opportunity.

4. If you’re struggling to find money to save, looking if your company offer to match employee contributions and have a retirement plan.

5. Open a high interest savings account at a bank and set up automatic transfers into this account. I reccomend ING Direct or FNBO Direct.

6. The better way to build credible wealth by paying yourself is to earn more money. When your income increases, set your gains aside for retirement and savings.

It’s not never too late to start pay yourselves first. I started saving money just a few years ago. Better late than never.

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Today I’m going to highlight some of the informations that could be useful for those that want to cover those emergencies that do tend to happen to anyone of us.

Recently, my reader asked me, how much cash reserves should one always have on account. Well, according to my experience, not everyone should have the same cash reserves. People have different needs that are proportional to income they have. In particular, It depending on these four circumstances:

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1. If you have a regular income, the percentage of your annual income you should save for your emergency fund  is 10%.

2. If your job don’t guarantee a regular income, the percentage of your annual income you should save for your emergency fund is 20%.

3. If you are retired, the percentage of your annual income you should save for your emergency fund is 30%.

4. If you have a problem of cover bills and rent in the event that you losing your job, the percentage of your annual income you should save for your emergency fund is 40%. Of course, you’ll should have it saved before you are in danger of losing your job.

If you think that you have a very low risk of income disruption, then you no need an emergency fund of 40% of your income as someone else.

Of course, the first thing to do is to take a minimum base liquidity or cash reserves in order to be safe agains any problems. I read recently that according to financial gurus you should have cash reservers equal to 3 to 6 months of income.

In my view, the 3-6 months of expenses means you have more work and many people just don’t do that. I think have cash reservers equal to 1-2 month of income is ideal. This fund should be used for instance when your car breaks down or you have an problem such as, house repairs, emergency trips, and so on.

With this economic crisis I’m trying to have at least 4 months of income in a savings account for the home and other problems. Hopefully it is never needed for emergency, but if one of us have problem we can still survive, we shouldn’t be worried if the money is there.

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When we’re talking about saving money, an emergency fund is definitely critical. An emergency fund is a means that save you from something of unexpected for your badget. Having a good emergency fund is like a self-insurance and an important part for having a healthy financial picture.

Usually, people who haven’t open an emergency fund have a difficult time saving money. For a newbie can be hard to start, but all you need is a shift in mindset.

To solve your problem, here, some easy strategies you can take immediately in consideration:

1. Stop getting into debt.
2. Reduce your spending by being more frugal.
3. Build an emergency fund of $1,000.

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How To Build A Robust Emergency Fund

If you have need of more help, here, some tips to build a robust emergency fund:

1. Start with $20. Despite you don’t have much money to open an emergency fund, don’t worry — the important thing is just to start. Find a high quality savings account with a decent return and put $20 there. Just start.

2. If you get a promotion, setting up an automatic transfer to your emergency fund until the fund grows large enough to accomplish the goal. Remember, don’t throw your money away.

3. In general, Set up an automatic deduction, for example by open an online savings account Emigrant Direct or ING Direct.

4.Every unplanned expense become an emergency, then take note. When your expense grow, add them into your budget. When you want to create an emergency fund you need to expect the unexpected.

5. You need of $1000 to start? Making an inventory of stuff you want to sell. I love creating an list, first because help me purge stuff, and possibly make money by selling it. Another thing you can do if you need of $1000 is to asking for a promotion or find a second job.

6. Having an emergency? Put your other savings goals away, and focus all of your energy on the priority things.

7. If you spend $350 for groceries, then save the difference. For instance, you can spend $400 for groceries, and save all you don’t spend into your saving account.

8. Cut out junk food. If you’re trying to lose weight, don’t buy junk food. Put the amount you would have spent in your saving account.

9. Keep paying debt. Once you paid a smaller debt, take the amount you were paying to that debt and add it  into your savings for the next months.

My next goal is to cover all my unexpected problem with an emergency fund of $2000, but is a slow process, and I’m building it 1 small piece at a time.

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