Start a Solid Emergency Fund in 2012

This is a guest post by Mark. You can also write a guest post about saving money.

In 2012 one of my big goals is to go from being just about ok financially to being comfortable – not loaded, but I want to get to a point where money isn't a daily concern. To do this I am making some big decisions which many would argue are too big a sacrifice, but I don't think that's true. I want to save up $9,000.

Step 1: Move Houses

Fortunately I rent at the moment, I would love to buy, but I'm not there yet. So I am moving house for several reasons:

• Rent: I am currently living in a pretty big house, the rent is actually very reasonable, but my wife and I really don't need 3 bedrooms. So we are going to downsize and save a bit of rent each month, maybe as much as $100.
• Bills: On top of the lower rent, we are expecting to save a pretty penny on bills too. Our current house is detached and expensive to run. We really don't like being cold, so our heating bills are high. We have estimated that we can save maybe $50 a month on heating and electric by moving to a cozy little 2 bed semi.
• Location: Currently we live about 30 mins from both our places of work, which means 2 hours total drive time per day, 5 days a week. Our plan is to live within cycling distance of my work so that we only need the one car each day. Just imagine how much gas we will save! About $200 a month by my estimate.

Step 2: Lose A Car

As I mentioned above, by moving to a more sensible location we don't actually need 2 cars any more. That means no insurance, no maintenance costs, no road tax, this could save us up to $150 a month.

Some people would say this is a big inconvenience, but I don't think it will be that hard to adapt. Other than driving to work, currently there is maybe 1 occasion in a month where we actually use both cars simultaneously – I really don't think we'll miss it.

Step 3: Pay Off The Car Loan

This is a no brainer, we sell the car and pay off the car loan – that is $200 a month we are saving immediately, and we will probably have a little left over to splash out.

Incidentally, because we are not going to do as many miles anymore we are going to keep the nicer but more expensive to run car – it will cost more in Gas and we could save even more by being 'sensible', but hey we have to have some luxuries.

Step 4: Stop Using Expensive Debt

For a while now we have been using overdrafts and credit cards sporadically, not on a long term basis, but to ease cash flow. Debt like this costs money though, especially after Christmas. Now that we are going to be saving all this money though, we can build a nice little buffer so that we don't have to rely on debt ever (we will still use free credit to build up our credit rating of course). This will probably save us another $30 a month.

Woo hoo! You're Out of Debt and Have an Emergency Fund.

So there you have it, that is how we are going to save an extra $8,760 in 2012, on top of our regular savings goals. This might seem extreme, but I think that all of these changes will be very easy to live with, and they will also allow me to get home earlier each day and stay in bed longer each morning... Who said saving money had to be hard work?

My name is Mark and I write for Currency Converter – a site dedicated to people who want to get financially educated and learn more about money. Thanks for reading.

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